Editing Openai/692cb885-da9c-8002-9696-e985fae204bd (section)

===== Streamlining Insurance and Administrative Overhead =====

Beyond billing transactions, there are broader reforms to reduce the administrative bloat in insurance and provider organizations:
* Administrative Cost Caps (Medical Loss Ratio Expansion): The Affordable Care Act already imposed a medical loss ratio (MLR) requirement on insurers, requiring at least 80–85% of premium dollars be spent on medical care (thus capping admin costs and profit to 15–20%). This has provided some discipline, leading insurers to issue rebates if they over-charge relative to healthcare spending. Policymakers could tighten this further – for instance, require an MLR of 90% for fully insured plans, or extend similar caps to third-party administrators of self-insured plans. Furthermore, one could explore caps on hospital administrative spending: for example, setting a target that no more than, say, 15% of a hospital’s expenditures go to administration (versus the current ~25% averagecommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=,as%20did%20rural%20facilities|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>). While enforcement is tricky, it could be tied to Medicare participation or state hospital regulation – hospitals exceeding the threshold might face penalties or need to submit a reduction plan. At a minimum, public reporting of each hospital’s administrative overhead percentage could create pressure (e.g., why is Hospital A spending 30 cents of every dollar on admin while Hospital B spends 15 cents?). Scotland and Canada spend only ~12% on hospital administrationcommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=,as%20did%20rural%20facilities|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>; if U.S. hospitals moved even partway to that benchmark, savings would be enormous (one 2014 study found '''$150 billion could have been saved in 2011''' if U.S. hospital admin were at Canadian levelscommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=Administrative%20costs%20account%20for%2025,than%20%24150%20billion%20in%202011|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=United%20States%20had%20the%20highest,than%20%24150%20billion%20in%202011|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>).
* Billing Simplification for Patients (One Bill System): A related idea is simplifying the patient billing experience. Patients often receive multiple bills (hospital facility, physician, lab, etc.) and EOBs that are hard to decipher. Some health systems have moved to a “single billing” model for patients – consolidating charges so patients see one clear bill. Insurers and providers could collaborate on a system where patients have a single point of contact for any billing questions or disputes, reducing the time patients spend navigating bureaucracy. While this is more about patient experience, it can indirectly reduce administrative work too (fewer phone calls and confusion if billing is clearer).
* Standardized Insurance Product Design: Another contributor to complexity is the proliferation of insurance benefit designs – different copays, formularies, referral rules, etc., which providers must know. Regulators could push for standardized insurance plans (as some ACA marketplaces do) so that key features (like drug tiers or out-of-pocket structures) are uniform. If every insurer’s plan followed a few common designs, providers could manage administrative tasks (like prior auth or referrals) more predictably. This reduces complexity for providers who currently juggle dozens of plan policies.
* Reduce or Reform Prior Authorization: Prior authorization (PA) – requiring insurer approval for certain tests or treatments – is a notorious pain point. While intended to control unnecessary care, it imposes large admin costs. Reform proposals include automating PA processes, making PAs “real-time” for most requests, and selectively applying PA only to outlier providers or services with high misusehamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=Simplify%20prior%20authorization,developed%20using%20information%20gathered%20in|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>. In fact, attaching a cost to prior authorization for insurers (e.g., if an insurer requires PA and the service is later approved, the insurer might have to pay the provider a small fee for the extra work) has been suggestedhamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=Simplify%20prior%20authorization,developed%20using%20information%20gathered%20in|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref> to discourage excessive use of PA. In late 2022, CMS proposed a rule to streamline PA for Medicare Advantage and marketplace plans by requiring faster turnaround and electronic submission – such initiatives need to be implemented and enforced. Simplifying or standardizing PA forms and criteria across payers would also cut waste; providers could then check a universal electronic portal to get approvals rather than navigating each insurer’s website and rules.
* Health IT Interoperability: A significant portion of administrative hassle comes from incompatible electronic health record (EHR) systems and lack of data sharing. Doctors often manually transfer information or duplicate tests because records aren’t shared. Federal efforts via the 21st Century Cures Act are pushing for interoperability (through APIs and data standards like FHIR). Achieving true interoperable data systems would streamline many admin tasks – for example, automating insurance eligibility and benefit verification at the point of care, instantly fetching a patient’s coverage details, or automatically pulling prior test results from another provider rather than refaxing records. When data flows easily between providers and payers, administrative staff spend far less time tracking down information. Improved data exchange can reduce care delays and the need for redundant administrative coordinationhamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=Enhance%20data%20interoperability,reduce%20prices%2C%20enable%20physicians%20to|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=Enhance%20data%20interoperability,reduces%20administrative%20costs%20associated%20with|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>, thus lowering costs associated with things like manual record requests or reconciliation of information.
* Fraud and Abuse Prevention vs. Administrative Burden: The U.S. expends a lot on administrative processes to combat fraud (audits, claims review, etc.). While important, some reforms look to balance fraud prevention with simplicity. For instance, targeting fraud enforcement on truly high-risk areas and easing up on low-risk claims can reduce paperwork for honest providers. Some international systems accept a small degree of fraud as a trade-off for simpler processing, whereas the U.S. layers on complex rules that burden everyone. Finding the right balance (via data analytics to catch fraud outliers, rather than blanket requirements on all claims) could cut administrative load without a major cost trade-off.
* Financial Impact: By various estimates, administrative simplification could yield anywhere from $50 billion to over $200 billion in annual savings, depending on the scope of reformsamericanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Each%20year%2C%20health%20care%20payers,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=Administrative%20costs%20account%20for%2025,than%20%24150%20billion%20in%202011|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. A single-payer Medicare for All model is often cited as the extreme case, which might save $200–$300 billion per year in administrative costs by eliminating multi-payer complexity (though such a system has other cost implications)americanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=for%20American%20Progress%20estimates%20presented,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>. Short of that, achieving even a one-third reduction in billing and insurance overhead (which some incremental reforms might manage over time) would save around $160 billion a year (one-third of ~$496B)americanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Each%20year%2C%20health%20care%20payers,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>. The Hamilton Project calculated that a suite of specific administrative reforms (standardized billing, streamlined PA, harmonized quality reporting, and better data sharing) could save about $50 billion per year (roughly $150 per American)hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=patients,150%20per%20person%20per%20year|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=discouragement%20from%20accessing%20health%20care,150%20per%20person%20per%20year|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>. These savings manifest as lower operational costs for providers (potentially allowing lower fees) and lower administrative loads for insurers (which could translate to slightly lower premiums if competition forces savings to pass through). Furthermore, less tangibly, physicians would reclaim hours of time – potentially spending more time seeing patients rather than doing clerical work, which could improve productivity and partially address clinician burnout.