In the Health Affairs Blog, Harvard economics professor, David M. Cutler, explains why health care administrative costs are extremely high and the need to lower them. Drs. Steffie Woolhandler and David Himmelstein have found that a move to a single-payer, Medicare for all, health care system would both guarantee everyone coverage and cut $600 billion in administrative waste, lowering health care spending substantially. Cutler recognizes these features of Medicare for All, but is not willing to advocate for it. You have to wonder who’s lining his pockets.
Cutler sees the myriad benefits of lowering administrative health care costs. He appreciates that they consume as much as 25 percent of our health care spending. And, he knows reducing administrative costs would generate significant savings.
Cutler also understands that some significant part of administrative spending goes to undermining people’s ability to get care. Administrative costs kick in every time you need a pre-authorization or a referral; every time you call your health plan to figure out who is in its network; every time your doctor needs to get on the phone for an approval; every time you have to fight a denial of care.
Indeed, more than one in five health care workers, 22 percent, are engaged in administrative jobs. For each doctor and dentist, there are just under four administrative employees. In addition, doctors and nurses undertake considerable administrative work.
The majority of administrative expense is in billing and insurance-related services. Before you can see a doctor, the doctor’s office needs to check your insurance coverage. It has to determine the amount you owe out of pocket. It needs to put codes on the care you receive. And, the insurer must pay the claim.
Cutler acknowledges that a Medicare for all system would save a lot of these costs. In part, Medicare for all minimizes the paperwork. He makes the case for reducing administrative costs, but he then dismisses moving to Medicare for all, claiming that its tradeoffs “may not be appealing.”
As Don McCanne, MD, writes in response, Medicare for all has many appealing qualities, not simply reduction of administrative waste. It offers guaranteed universal coverage, affordable and easy access to care, transparency, the ability to make health care system improvements, promotion of the public health and lower health care spending. What is it about our multi-payer for-profit system that Cutler does not want to lose?
Here’s more from Just Care:
- Medicare for all would save $600 billion a year in administrative costs
- Medicare for all would help us combat Covid-19
- Medicare for all would save 68,000 lives a year
- Traditional Medicare protects people from unexpected costs
- Medicare Advantage: Will you get care from the doctors you want to see at a price you can afford?
