Administrative Costs in the US Health Care System

By September 27, 2019 September 30th, 2019 Commentary

The Center for American Progress is a supposed think tank, actually completely thoughtless, that exists solely to put out misleading reports in support of whacko proposals like Medicare for All.  One of its favorite lies, a consistent tactic by similar groups, is that administrative expenses in the US health system are extraordinarily high and could be greatly reduced by a single-payer system.  In particular this report focuses on billing and collection costs for both providers and payers.   (CAP Report)  The report claims that payers and providers spend $496 billion a year on these costs, but throughout the report it is impossible to tell what these authors are lumping into that bucket.  In some cases it even seems to be medical spending.  The authors justify this estimate by referring to reports by other advocacy groups.  Absolutely no real data lies behind this estimate and it is completely inconsistent on the payer side with data filed in detailed reports by health plans with state insurance regulators.  They also rely on work by Woolhandler, Himmelstein and colleagues, all well-known ideologues.  These geniuses, in papers, the core one of which is dated from 1999, also based on nothing but conjecture, claimed that administrative costs were 31% of all health spending.  Just absurd.  The authors next conflate the spending that providers intentionally incur to maximize revenue with its total impact on health spending.  This isn’t spending mandated by the way the system works; it is voluntary administrative spending.   As I said in a post earlier this month, I would be happy to see that spending and those practices of upcoding go away.  The authors then reference a 2010 study by the National Academy of Medicine which similarly has serious limitations in its methodology.   But in contrast to the prior report they referenced, with the 31% of spending estimate, this one says it is only 14%.  There is no point in even going through this nonsense point by point.  I have analyzed almost every report they rely on in posts over the last decade.  This is nothing by ideological drivel, not a serious effort to identify what spending really is, how much of it actually may have value in reducing health spending, and nothing about the substantial costs that would be imposed by some kind of single-payer system.

People should have learned from the last health care reform effort.  Lie after lie was told to justify passage, including that premiums would go down, they went way up instead.  The same approach is being used to try to sell Medicare for All.  These people believe that the ends justify the means; and that therefore they are entitled to lie.  Don’t let them get away with it.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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