This Chart Shows the Big Admin Costs Behind Americans’ Medical Bills

$215 to process a routine medical procedure? It’s not like this everywhere.

November 01, 2022

| by Dave Gilson
Illustration of businessman pushing brick wall to reveal money behind

Complex billing adds to the cost of the United States’ expensive healthcare system. | Credit: sesame/iStock

Administrative complexity is the source of more than $250 billion in wasteful healthcare spending in the U.S. annually, according to the Journal of the American Medical Association. “And that’s probably an underestimate,” says Kevin Schulman, a professor of operations, information, and technology (by courtesy) at Stanford Graduate School of Business.

It’s not like this everywhere. In a new study, Schulman and his coauthors looked at the billing and insurance-related costs in several countries — costs that cover administrative tasks, not actual medical care. They found that the estimated billing cost for an inpatient procedure in the U.S. was between $124 and $215. In the Netherlands, which has a similar private multipayer market, it was $30. In Canada, which has a single-payer system, it was $6.

Those bigger bills don’t mean Americans are getting better care; they (and their employers and insurers) are just paying more for it. “At a minimum, if we could adopt a system like the Netherlands’, we could probably return $2,000 per household,” says Schulman, who is also a professor at Stanford University School of Medicine.

A major cause of outsized billing costs is coding — the complex system providers and insurers use to track every component of a patient’s care. “It’s as if you went to a car dealer and they charged you for every single part rather than just buying a car,” Schulman says.

The U.S. could learn a lot from countries with lower billing costs, Schulman says. He also thinks there’s an exciting opportunity for companies to come in and streamline medical coding and billing. “The good news,” he says, “is we don’t have to totally revamp the U.S. healthcare system to dramatically lower administrative costs.”

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