If you go to the doctor or dentist in the U.S., you can often get a discount if you pay out of pocket compared to paying through insurance. Why is that? Wouldn’t the doctor like to be paid by a large insurance company rather than incurring credit card charges for the patient’s self-pay? The reason doctors don’t like insurance is because payment is slow, uncertain, and administratively burdensome for their staff.
A recent article by Sahni and others (2024) First, the criteria for an efficient market system are identified and it is shown that health care in the United States is far from being an efficient payment system.
Efficient financial transaction ecosystems in other industries and countries exhibit two characteristics: immediate payment assurance and high use of automation throughout the process. The current system has an average transaction cost of $12 to $19 per claim between private payers and providers for more than 9 billion claims per year; each claim on average takes 4 to 6 weeks to process and pay. For simple claims, the transaction cost is $7 to $10 between private payers and providers; for complex claims, $35 to $40. Prior authorization of approximately 5,000 codes has an average cost of $40 to $50 per submission for private payers and $20 to $30 for providers. Interventions aligned with a more efficient financial transaction ecosystem could reduce spending by $40 to $60 billion…
The authors state that approximately half of the cost savings could be achieved through patient referrals within the organization (i.e., scaling up interventions) and the other half through industry-wide systems (e.g., a centralized, automated claims clearinghouse, standardized medical policies, etc.). The table below summarizes these potential savings.
You can read the full article here.
