We hear a lot about high health insurance premiums. Some of the high premiums have to do with the inefficiency of the health insurance industry, as written here last week. The basic reason for high premiums, however, is the high cost of healthcare. If you have a Ferrari, your insurance will be higher than if you have a Ford Taurus. High cost is the first and foremost barrier to affordable healthcare. As a percentage of gross domestic product, a measure of the size of a country’s economy, American healthcare cost is the highest among all developed countries in the world, and it is unaffordable for many millions of people.
A group of experts classified the high cost of healthcare into five broad categories of waste: (1) providing healthcare services that are not proven to improve health, (2) delivering healthcare using inefficient methods, (3) charging non-competitive prices for products and services, (4) incurring excessive administrative costs in delivering healthcare and the processes used for payment of healthcare, and (5) missed opportunities to lower healthcare spending by focusing on prevention of injury and illness. I would add fraud, lack of tort reform, and medical errors to the list.
On point #4, a new study was published this week by the Journal of the American Medical Association titled “Administrative Costs Associated With Physician Billing and Insurance-Related Activities at an Academic Health Care System”. The study found processing time and total costs for billing and insurance-related activities were significant. For a primary care visit it was 13 minutes and $20.49. For a discharged emergency department visit, 32 minutes and $61.54. For a general inpatient stay, 73 minutes and $124.26, and for an inpatient surgical procedure, 100 minutes and $215.10.
Major corporations would find such an inefficient set of processes unacceptable, yet in healthcare, we have been accepting them. Until now. Every day 10,000 Americans turn 65 and enter the Medicare system, which spends an average of $10,000 per person per year. Healthcare cost is going to bankrupt our country if something doesn’t change. Fortunately, Amazon, JP Morgan, Berkshire Hathaway and others are stepping into the arena, because even these wealthy companies can no longer afford the healthcare bill for their millions of employees. Hopefully, there will be a trickle down effect from their actions to reduce healthcare cost.
If you are interested in learning more about healthcare cost, fraud, tort reform, and how America compares to other developed countries, read Health Attitude: Unraveling and Solving the Complexities of Healthcare. It is available in print, Kindle, and Audible.
