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Complexity Leads to Higher Health Care Costs

Not only is the U.S. health system the most expensive in the world, but its administrative cost also ranks No. 1 on a global scale. Administrative costs originate from such activities as filing insurance claims, billing patients and navigating computer systems.1 In addition to these administrative expenses, the more time doctors spend on paperwork, the less time they have to actually see patients.

 

Various studies have shown that the approximate administrative cost of the U.S. health care system ranges from 25 percent to 30 percent of total expenditures. Billing-related tasks alone account for a large part of a provider’s revenue. For example, in one study, activities associated with billing represented 25 percent of revenue for emergency department visits and 15 percent of revenue for visits to a primary care provider’s office.2

 

“The extraordinary costs we see are not because of administrative slack or because health care leaders don’t try to economize,” said Kevin Schulman, a co-author of the study and a professor of medicine at Duke. “The high administrative costs are functions of the system’s complexity.”3

 

Imagine how much money could be saved by patients, doctors, medical facilities and insurers alike if administrative functions could be integrated, streamlined or eliminated altogether. Moreover, given the rising number of aging Americans, consider how much more time physicians, specialists and other care providers could spend treating patients instead of handling paperwork.

 

One thing to consider when planning for retirement is how you will pay for possible increased health care expenses. Some insurance products such as life insurance and annuities provide various options you may want to consider. We’d be happy to discuss your options based on your unique situation.

 

1 Austin Frakt. The New York Times. July 16, 2018. “The Astonishingly High Administrative Costs of U.S. Health Care.” https://www.nytimes.com/2018/07/16/upshot/costs-health-care-us.html. Accessed Aug. 16, 2018.

2 Ibid.

3 Ibid.