Journal Outlines Waste in Private Health Care

By Sam Uretsky

The current issue of The International Journal of Health Services (Vol. 34, No. 1) should be required reading for everybody with a stake in government, which is everybody. One of the reports in the Journal, "Administrative Waste In The US Health Care System In 2003: The Cost To The Nation, The States and The District Of Columbia, with State-Specific Estimates Of Potential Savings," is probably the most detailed review of the sorry state of our alleged health-care system ever written.

The report, prepared by researchers from Harvard Medical School and Public Citizen, analyzes the costs of needless paperwork associated with health care financing and compares it with estimates based on the Canadian single-payer system. They estimate that the US could save at least $286 billion each year by moving to a single payer system. That would be enough money to provide health insurance to the 40 million people who don't have coverage, and also offer a prescription benefit plan that benefits somebody besides the pharmaceutical industry.

There would even be $20 billion left over for job retraining for those people who would lose their jobs because of the simplification of the health care reimbursement system.

Health care now accounts for 15% of US gross domestic product, and in 2002 the amount spent on healthcare rose by 9.3%. While a portion of this increase can be explained by an aging population and higher costs associated with new diagnostic equipment and new treatments, the portion of health expenses attributable to administrative overhead -&endash; confirming eligibility, filling out forms &endash;- rose by 16.8%, and this was on top of a 12.5% increase in 2001.

We've been told over and over that the private sector is more efficient than government, but it's the private sector of the economy that's responsible for this level of waste. There are hundreds of private insurers, each with their own forms, rules, and referral networks. It takes an army of workers to confirm eligibility, fill out forms, determine whether the treatment fits the rules set by the insurer, and so on. Physicians for a National Health Program has reported that in Seattle there are at least 755 different health insurers. This seems like an area in which competition hasn't resulted in lowered costs.

The savings could more than offset state budget deficits. Massachusetts, which has very high per capita health administrative spending and a relatively low rate of uninsurance, could save a total of $8.6 billion a year, while its current estimated deficit is about $2 billion. Texas, with 4.96 million uninsured (nearly one in four Texans), could save $19.5 billion a year on administration under a national health system, which would make available $3,925 per uninsured resident per year. The estimated budget deficit for Texas for fiscal 2004 is $7.8 billion according to the Center on Budget and Policy Priorities.

There's more. Most discussions of the number of people without medical insurance rely on the US Census Bureau's number of 43.6 million, with appropriate adjustments. But in November 2003 the Commonwealth Fund released results of a four-year study of health insurance. While the census found that, over the course of a year, 43.6 million people were without insurance at some time, the Commonwealth Fund found that over the longer term 85 million people lacked health insurance for some period. They estimated that over a four-year period, 40% of Americans go without health insurance for at least some length of time. So the actual likelihood of being without health insurance at some point must greatly exceed 40%.

The Bush administration continues to push for the privatization of social programs, but the numbers seem clear. Private industry has given us a health care system that is cumbersome and costly. This is a clear instance of where government could do better, at half the price.

Last note: According to Common Cause, in 2002, the insurance industry gave $37,570,420 in political contributions, 69% of which went to Republicans.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y.

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