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Senate searches for ways to reduce health care administrative costs

Author: Tom Ramstack - August 1, 2018 - Updated: August 23, 2018

(Photo by HighLaZ, istockphoto)

WASHINGTON — Health care officials at a U.S. Senate hearing Tuesday advocated methods to reduce the industry’s administrative expenses in ways similar to those proposed by Colorado Democrats.

Administrative burdens from insurers and government regulators commonly represent 8 percent of patients’ bills, according to the chairman of the Senate Health, Education, Labor and Pensions Committee.

Federal regulators share the blame for administrative costs imposed on doctors, which means “more time spent on paperwork, less time actually treating patients and an increase to the cost of health care,” said Sen. Lamar Alexander, R-Tenn., the committee chairman.

By comparison, administrative costs in other countries rarely rise above 3 percent, Alexander said.

Much of the administrative cost comes from “coding,” or filling out the paperwork required by insurance companies. The companies use the documentation to determine whether to pay doctors’ bills but also to comply with government regulations.

Last February, Colorado Gov. John Hickenlooper, a Democrat, joined four other governors to announce a health care reform proposal that includes plans for reducing regulatory burdens. One part of the plan seeks to eliminate “duplicative” regulations that add to costs for patients.

In addition, Colorado U.S. Rep. Diana DeGette, D-Denver, is awaiting Senate action on her bill to reduce administrative delays for introducing over-the-counter medicines to market.

The bill, H.R. 5333, seeks to reform how the Food and Drug Administration reviews and approves the medicines. It relies on administrative orders that are faster to complete than rulemakings to decide whether medicines are adequately safe to be sold to consumers. The bill won approval in the U.S. House but awaits Senate action.

DeGette plans to discuss the legislation during a public presentation Thursday afternoon at the Clear Spring Pharmacy in Denver.

Two years ago, Colorado U.S. Sen. Michael Bennet contributed to legislation that speeds up access to antibiotics to treat life-threatening conditions. Bennet, a Democrat, is a member of the Senate Health, Education, Labor and Pensions Committee. He did not question witnesses during the hearing Tuesday.

One of the witnesses was David Cutler, a Harvard University economics professor. He suggested greater use of standardized pre-authorization forms when doctors seek to be paid for treating patients.

“The average U.S. physician spends 43 minutes per day interacting with health plans about payment, dealing with formularies and obtaining authorizations for procedures,” Cutler said in his testimony. He estimated administrative costs could raise patients’ bills by as much as 30 percent, rather than the 8 percent estimate from the committee’s chairman.

Some insurance companies introduce tough new rules to make certain doctors do not bill them for unnecessary procedures, he said.

“In response to new rules, (doctors) hire additional personnel to maximize the amount they are reimbursed,” Cutler said in his Senate testimony. “Witnessing this, insurers beef up rules yet again, putting in place additional requirements for payment. The net effect is a spiral of cascading administrative costs on both sides of the market, with no benefit to patients and no net benefit to insurers or providers.”

Standardized pre-authorization forms would discourage what he called an “arms race” of new rules and additional forms from insurance companies.

He also suggested wider use of electronic transactions using computers that can communicate with each other across the nation’s health care system. Otherwise, patients’ records and transactions can become lost in a single computer system.

Matt Eyles, president of the trade group America’s Health Insurance Plans, disputed accusations of too much bureaucratic fumbling by insurance companies.

“The vast majority of every health care dollar goes to pay for medical treatment and services,” Eyles said.

Pre-authorizations for treatment might be a burden for some doctors and patients but they serve an important function, according to insurers.

“With prior authorization, our members analyze whether a treatment is safe and effective for the patient based on the best available clinical evidence,” Eyles said.

Insurance companies are trying to move toward completely electronic pre-authorizations to improve efficiency, he said.

Sen. Patty Murray, D-Wash, said the “junk” health plans the Trump administration has pushed as an alternative to the Obama administration’s Affordable Care Act contribute to paperwork.

“An analysis from the National Association of Insurance Commissioners shows the most popular short-term junk plans, like the ones President Trump wants to expand, spend, on average, half of their revenue on things that have nothing to do with customers’ health care needs,” Murray said.

Tom Ramstack

Tom Ramstack