Healthcare bureaucratic bloat is costing the US economy $570B a year, report finds

Administrative waste in healthcare costs the US economy more than half a trillion dollars each year, a report shows.

Health Affairs, a leading health policy magazine, estimates that $570 billion is wasted annually on administrative costs and bloat associated with billing and insurance.

This wasteful expenditure accounts for 7.5 to 15 percent of all healthcare costs in the US.

The report uses data from 2019 – before the Covid pandemic. Researchers fear that the amount of wasteful spending has only increased over the past two years.

The US spends more than three times as much as Germany on health care for every member of the population, and has 44 percent more administrative staff than Canada.

Despite this, there is no data to show that these higher expenditures lead to higher quality care or better patient outcomes.

The research team gathered data from seven analyzes of healthcare spending in America from 1999 to 2019 for their study, which was published last week.

They found that spending on health care in 2019 now made up 17.7 percent of the country’s GDP — up from 6.9 percent in 1970.

This is more than double the spending of the average developed peer nation, which spends an average of 8.8 percent.

It is estimated that spending now accounts for nearly 20 percent of US GDP.

This figure was expected to reach through 2028, highlighting the acceleration in spending due to the pandemic.

Administrative costs account for up to a third of this spending in the US. The team defined administrative costs as all expenses that are not related to care.

This includes costs paid to insurance companies, industry intermediaries, and to fund billing and other departments within the health systems.

In the report, the researchers write, “Even at the lower end of the estimates, U.S. spending on administrative costs is twice as much as spending on cardiovascular care and three times as much on cancer care each year.”

While some of this expenditure is necessary for a health care system to run smoothly, about half is unnecessary, researchers found.

Overall, the U.S. spends about $1,055 per person annually on health care administrative costs, researchers wrote.

By comparison, Germany spends just $306 per capita — a third of the U.S. total.

This can be attributed to the large amount of administrative personnel working in America.

According to the report, there are 44 percent more administrative staff in the US than in Canada.

Doctors also bear some of the administrative burden, spending 13 percent of work time on non-care tasks.

A review of studies over the two-decade period found that up to half of this work was unnecessary and the resources used for it were wasted.

Researchers write that creating more standardized pricing in healthcare and eliminating the need for “pre-authorization” could help reduce the amount of waste in US healthcare (file photo)

Researchers say in a briefing that massive shifts to US healthcare would be necessary to ease the burden of overspending.

They say standardized rates for hospital services could be a start.

Under the current system, the cost of a procedure can vary widely depending on the hospital, health system, and even a patient’s insurance policy.

As a result, both insurers and healthcare providers need dedicated staff to negotiate prices alone.

The research team proposes an all-payer pricing system, which would establish uniform costs for hospital services across the board and remove much of the administrative burden.

They also recommend centralizing billing systems to a single clearinghouse responsible for handling claims from US insurers and providers.

This would reduce the need for each individual health system to spend that much on their own billing staff, which is less efficient than a central system.

Researchers from VWS also recommend phasing out the system of prior authorisations, whereby a health insurer determines whether care by doctors is necessary.

The system has been widely criticized for taking medical decision-making power away from doctors who treat the patients and giving it to insurance actuaries.

While a person may still receive treatment without the insurer’s consent, they must pay for it themselves.

It could cause major delays in the delivery of medical care and further bog down the health system, which is already backed up.