Center for American Progress

RELEASE: CAP Unveils Proposal for Reducing Health Care Administrative Costs
Press Release

RELEASE: CAP Unveils Proposal for Reducing Health Care Administrative Costs

Read the report.

Washington, D.C. — Today a new report released by the Center for American Progress outlines a set of specific recommendations to significantly cut wasteful health care administrative costs, reducing overall spending on health care by as much as $40 billion a year. The recommendations were unveiled at an event featuring key stakeholders in the health field, including leaders of the health insurance industry and physicians.

Administrative costs in the U.S. health care system consume an estimated $361 billion annually, representing 14 percent of total health care expenditures. At least half of this spending has been estimated to be wasteful. In an era of budget deficits and rising health care costs, the case for reducing administrative complexity is compelling. Successful efforts can result in significant financial savings while simultaneously improving system performance indicators and the quality of patient care.

“This report shows that the time for action is now. We know the problem and we know the solution. Every moment we delay results in more cost, more waste, and more frustration,” said David Cutler, one of the report’s authors and a Senior Fellow at the Center for American Progress.

The paper, entitled "Paper Cuts: Reducing Health Care Administrative Costs," outlines the nature of administrative costs affecting both health care payers and providers, and considers ways to contain these costs. The report outlines a three-pronged strategy for addressing administrative costs:

  • Integration: embedding administrative simplification rules and systems into existing reform efforts
  • Coordination: bringing together similar administrative processes by different health care participants to maximize efficiency
  • Leadership: creating a new federal office dedicated to simplifying health care administration

Taken together, these efforts could reduce excessive administrative costs by 25 percent, or $40 billion per year, across the entire health care system. The federal government could save more than $6 billion per year. An aggressive agenda tackling administrative inefficiency would not only reduce unnecessary complexity and federal health expenditures but would also improve the quality of care.

"The AMA commends CAP and the authors of the report for highlighting the importance of streamlining the administrative burdens imposed by the current health care system,” said Dr. James Madara, executive vice president and chief executive officer of the American Medical Association. “For too long, this wasteful administrative burden has forced physicians and other health care providers to divert resources that should be devoted to patient care."

Read the report:
Paper Cuts: Reducing Health Care Administrative Costs, by David Cutler, Peter Basch, and Beth Wikler

Watch the event:
Watch a recording of the CAP event at which CAP Senior Fellows David Cutler, Peter Basch, and Ezekiel Emanuel, as well as Karen Ignagni of America’s Health Insurance Plans and Dr. James Madara of the American Medical Association discuss the report’s recommendations.

To speak with a CAP expert on this topic, contact Katie Peters at 202.741.6285 or [email protected]

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