“We all sort of suspected there was quite a big number, but when we came down to the actual figure it was certainly revealing,” said Aliya Jiwani, health policy researcher and lead author of the report, which was published by the journal BMC Health Services Research.
Jiwani said that while “the administrative costs have been an issue” in the health-care world for years, “the fixes that have been put in place have only aggravated the issue.”
In fact, the paper notes that “administrative costs as a percentage of total health care spending more than doubled from 1980 to 2010.”
Read More Deals, data at JPMorgan health conference
The authors of the paper write that the savings from eliminating trillions of dollars in administrative waste over the years “could cover all of the uninsured” people currently in the U.S. if a single-payer system were adopted. They estimate the cost of covering all of the roughly 40 million Americans still lacking health insurance would be equal to just about half of the $375 billion in projected savings.
The balance of those savings, they write, could “upgrade coverage for the tens of millions who are under-insured.”
While the paper identified a very big number of wasted dollars, it remains a big question of whether that could lead to a single-payer system anytime soon.
Congress has not seriously considered a single-payer system for the entire nation, such as one that could take the form of Medicare, the federally run program that covers Americans age 65 and over. Vermont recently scrapped its plan to move the entire state to a single-payer system because the estimated costs were too high.
And the Affordable Care Act remains relatively unpopular in national opinion polls even as it offers federal subsidies, or tax credits, to help people sign up in private individual insurance plans sold on government-run exchanges.
Ed Haislmaier, a senior research fellow of health policy studies at the conservative Heritage Foundation, said “there’s a whole lot of reasons” not to move to a single-payer model.
“Basically, you’re allocating health-care resources based on politics and not necessarily on needs, and that ends up introducing all kinds of inequities and inefficiencies into the system,” Haislmaier said. “The thinking is you want to provide a system that provides better values. … You’re not going to achieve that through government administration, you’re only going to achieve that through a competitive private model” in which superior providers are given more customers and consumers get lower prices, he said.
However, the authors of the paper say switching to a single-payer model contains a potentially large financial incentive by shedding much of the administrative costs of the current system.
Those costs stem from the complexity of the system’s billing and insurance apparatus, in which health services are paid for by employer-sponsored insurance plans, individual private insurance plans and government-run programs such as Medicare and Medicaid. Individuals also foot part of the bills in the form of deductibles and other cost-sharing.
Read More Ten year flu shot near reality: Mount Sinai CEO
“In the U.S. multipayer system, insurers’ coverage, billing and eligibility requirements often vary greatly, requiring providers to incur added administrative cost,” the paper said.
The paper calculates that billing and insurance-related costs, or BIR, totaled $471 billion in 2012.
That total includes a whopping $198 billion in BIR costs from private insurance companies, and more than $70 billion apiece from hospitals and physician practices. The “other health services and suppliers” sector spent $94 billion in BIR costs, and public insurers spent $35 billion, the paper said.
Of the total of $471 billion in BIR, an estimated $375 billion—or 80 percent—is “additional spending” that would be eliminated by “a simplified financing system” such as single-payer, the report said.