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Jeff Sutherland

Twice the Energy with Half the Stress

Update on Healthcare Financing: 2002 spending $1.6 trillion and mismanagement of heathcare billing absorbs one third of healthcare costs

Health spending rebound continues in 2002

Levit K, Smith C, Cowan C, Sensenig A, Catlin A

Health Accounts Team. National Health Statistics Group, Office of the Actuary, Centers for Medicare and Medicaid Services, Baltimore, USA.

Health Aff (Millwood). 2004 Jan-Feb;23(1):147-59.

U.S. health care spending climbed to dollars 1.6 trillion in 2002, or dollars 5,440 per person. Health spending rose 8.5 percent in 2001 and 9.3 percent in 2002, contributing to a spike of 1.6 percentage points in the health share of gross domestic product (GDP) since 2000. Hospital spending accounted for nearly a third of the aggregate increase. During the past three decades, per enrollee spending for a common benefit package has grown at a slightly slower average annual rate for Medicare than for private health insurance, with more pronounced growth differences recently reflecting legislated Medicare reimbursement changes and consumers’ calls for more loosely managed care.

Last year the Boston Globe reported on the major reason that U.S. healthcare is the most expensive in the world, while patient outcomes are very bad compared to other developed countries. One third of the healthcare budget is wasted in adminstrative billing systems that are incompatible and compute bills in so many different ways that the Globe describes it as “medical mayhem.” Given that the third leading cause of death is medical error and the majority of errors can be eliminated by proper automation, the fact that automation cannot be implemented because of mismanagement of financials is a deadly aspect of our neglect of the most important service industry in the U.S.. As Einstein once said, there is only one thing without limit and that is “collective stupidity.”

Paperwork pileup

Technology is only part of the problem in the medical billing logjam. A far bigger obstacle is mistrust between doctors and health insurers.

By Beth Healy, Globe Staff, 4/21/2003

Even in a slow economy, hiring has been brisk in a corner of Massachusetts General Hospital that patients never see: the billing department. This group of claim handlers, coding specialists, computer gurus, and data-entry clerks shoulders the labyrinthine task of getting insurance companies to pay more than 1,200 Mass. General physicians for taking care of patients. The department has grown 32 percent since 2000 — three times as fast as the doctor ranks. It’s now an army of 250, based at the former Charlestown Navy Yard, a mile away from the prestigious Boston hospital, with an annual budget of $10 million that has nearly doubled in three years. The system is broken when it takes one administrative worker for every five doctors to get bills paid, executives who run the Massachusetts General Physicians Organization argue.