Mission Possible II: Reducing Health Care Costs Through Administrative Simplification
February 24, 2012
Michele J. Orza, ScD
Most proposals for solving the nation's economic woes assume that health care costs can be tamed by reducing the estimated 30 percent of health care spending that is wasted in that it does not serve to improve health and may even be harmful. The Institute of Medicine Roundtable on Value & Science-Driven Health Care describes several categories of wasted spending: unnecessary services, excessive administrative costs, inefficiently delivered services, prices that are too high, medical fraud, and missed prevention opportunities. Excessive administrative costs, the second largest category of waste, are driven by the complexities of dealing with varying documentation requirements from multiple payers and other entities. Streamlining these could result in the largest amount of savings of all the options the Roundtable identified--an estimated $181 billion annually (39 percent of the total savings achievable if all options were fully implemented).
The opportunity to save on health care costs while making things easier for all concerned seems like a win-win. However, administrative simplification is perhaps not simple. More than 15 years after its passage, the promise of the Health Insurance Portability and Accountability Act for administrative simplification and standardization has not been fully realized. Most recently, the Patient Protection and Affordable Care Act of 2010 has opened the door for reconsideration of multiple aspects of administrative simplification. Nevertheless, some of the needed policy changes involve great challenges, including complex systems, excruciating detail, a host of actors with vested interests, up-front costs with long-term benefits, and sheer inertia.
A previous Forum session provided an overview of excess health costs, causes identified, and possible solutions to wasteful health spending, with a focus on that attributable to unnecessary health care services. This Forum session explained excessive administrative costs and proposals for streamlining and featured the perspectives and initiatives of physician practices, hospitals, and insurers.
- Lewis G. Sandy, MD, MBA
Senior Vice President, Clinical Advancement
- David N. Gans, MSHA
Vice President, Innovation and Research
Medical Group Management Association-American College of Medical Practice Executives
- Joseph S. Smith, MBA
Senior Vice President and Chief Information Officer
Arkansas Blue Cross and Blue Shield
- Michael Stevenson
President and Chief Executive Officer
Murphy Medical Center, North Carolina
See the previous Forum session on this topic, "Mission Possible? Saving on Health Care Costs by Reducing Unnecessary Services" (December 2, 2011), as well as a related meeting, "Implementing Incentives for Health IT: The Meaningful Use Regulation and Beyond," September 24, 2010).
See also Institute of Medicine's Roundtable on Value & Science-Driven Health Care.