NCPA - National Center for Policy Analysis

Healthcare's Paperwork Avalanche

March 2, 1999

The advent of managed care has multiplied the number of confusing forms patients must fill out in connection with their health-care coverage, experts point out. Moreover, insurance companies, hospitals and physicians report soaring administrative costs due to the proliferation of paperwork.

  • According to some estimates, administrative costs add up to $1,000 per person.
  • Insurance company overhead alone exceeded $74 billion last year, equivalent to 6.5 percent of all health-care costs -- a figure which rose from just 3.6 percent in 1970.
  • Just handling insurance billing claims costs $13 billion -- not including any of the costs the industry imposes on hospitals, doctors and patients.
  • Some 3 million clerks and managers are employed in the health-care industry -- nearly four times the number of doctors now practicing.

According to the New England Journal of Medicine, administration costs now account for more than one-quarter of all hospital costs.

Studies project that insurance companies' administrative costs will grow to $93.4 billion in 2001 and top $153 billion in 2007.

Health-insurance experts contend that state and federal regulations have greatly increased the industry's paperwork burdens and costs. For example, a study released by the Health Insurance Association of America reveals that of the nation's 43.5 million uninsured persons, up to one in four lack coverage due to the cost of government mandates.

Additionally, the same study finds that the number of state- imposed mandates increased at least 25-fold between 1970 and 1996.

Source: Editorial, "Pity the Poor Patient, Buried in Piles of Health-Care Paperwork," and Charles Kahn (Health Insurance Association of America), "Managed Care Means Lower Costs," both in USA Today, March 2, 1999.


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