Dr. Red Tape

One-Third of All Healthcare Money Spent on Paperwork 

MATT BIVENS / The Nation 16jan04

Talented, dedicated professionals armed with high-tech equipment take care of our health. But acres of forests and of time—and about $400 billion, or nearly one-third of all the money spent on health care—is just for the paperwork.

Four hundred billion dollars for the red tape!

It's a staggering sum—a Pentagon-sized sum. And according to the comprehensive study by researchers from the Harvard Medical School and from Public Citizen that produced this estimate, some $286 billion of that is utter waste—spending which could be jettisoned overboard by switching to a Canadian-style system. In Canada—where they spend half as much on health care yet have universal coverage and live two years longer than Americans—doctors use a single simple form to bill one insurance plan, and hospitals negotiate an annual budget with a single agency. (Compare that to US doctors and hospitals, who must hire enormous staffs to deal with hundreds of Byzantine forms from hundreds of insurance plans).

Some of the Democratic presidential candidates are advocating a switch to a Canadian-style single-payer system. If doing so would indeed save in the ballpark of $286 billion—well, this would be a classic case of having our cake and eating it. Compare that $286 billion savings to the estimated $80 billion cost of insuring every American. Or to the $53 billion price-tag for covering out-of-pocket prescription drug costs not just for seniors—but for everyone.

The study's authors note that there would even be, say, $20 billion or so—roughly what we're spending to "rebuild Iraq"—left over to help all of the instantly obsolete bureaucrats of the current system land on their feet.

Keep in mind that this study, published today in the International Journal of Health Services, isn't one of those exercises in hazy crystal-ball gazing so common in discussions of economics, science or policy priorities. This isn't a wild theory or an exotic opinion. It's a simple accounting problem—a real-world survey of what the Canadians spend on health care, and what we do.

In that spirit, consider the real-world comparison offered by Dr. David Himmelstein, an associate professor of medicine at Harvard and co-founder of Physicians for a National Health Program, of two similar-sized and equipped hospitals: Toronto General Hospital and Massachusetts General.

On a visit to the 900-bed Toronto General, Dr. Himmelstein recounts searching for the billing office; it ended up being a handful of people in the basement, whose main job was to mail bills to US patients who had come across the border. Canadian hospitals get an annual budget from their region's health plan—and a monthly check—and so they don't have to keep track of who received each Band-Aid, only how many Band-Aids overall were used. "It need not fight with hundreds of insurance plans about whether each day in the hospital was necessary, and each pill justified," Dr. Himmelstein says. "The result is massive savings on hospital billing and bureaucracy."

Back in Boston, Himmelstein visited Massachusetts General Hospital, which was similar to Toronto General in size and in the range of services provided. He was told that Massachusetts General's billing department employed 352 full-time personnel—all of them fighting tooth and nail with hundreds of insurance plans, each with their own rules about how to document every item used for every patient.

source: http://www.thenation.com/outrage/index.mhtml?bid=6&pid=1185 5mar04