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Healthcare administrative overhead in the US is pretty huge and has been for a long time. Back in the early 90s I worked on claim processing software and I rec

Healthcare administrative overhead in the US is pretty huge and has been for a long time. Back in the early 90s I worked on claim processing software and I recall it being discussed as being around a third of healthcare costs. Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider. In 2021, the U.S. spent $1,055 per capita on healthcare administration, while the second-highest country — Germany — spent just $306 per capita, Japan is $82. https://www.pgpf.org/article/almost-25-percent-of-healthcare-spending-is-considered-wasteful-heres-why/ https://www.pgpf.org/article/almost-25-percent-of-healthcare... Administrative spending accounts for between 15% and 30% of total medical spending, with lower estimates covering only billing- and insurance-related expenses, and higher ones including general business overhead such as quality assurance, credentialing, and profits. https://www.healthaffairs.org/do/10.1377/hpb20220909.830296/ https://www.healthaffairs.org/do/10.1377/hpb20220909.830296/ The Center for American Progress estimates that health care payers and providers in the United States spend about $496 billion annually on billing and insurance-related (BIR) costs alone. https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/ https://www.americanprogress.org/article/excess-administrati... The time burden on physicians is staggering — estimated at $68,000 per physician per year spent dealing with billing-related administrative matters. https://www.pgpf.org/article/almost-25-percent-of-healthcare-spending-is-considered-wasteful-heres-why/ https://www.pgpf.org/article/almost-25-percent-of-healthcare...

jimt1234 7mo ago
I witnessed this devolution with my GF. She's a medical provider in CA that, since the mid-90's, got her funding from a state agency. She met with the agency once per quarter, reviewed her funding claims, worked out any discrepancies one-on-one, in-person with her representative. Worked great. Then private insurance muscled their way in. It's been a bureaucratic nightmare ever since. She had to hire a full-time staffer just to handle all the insurance BS. She never needed that before private insurance. The nightmare isn't just for her; it's also for her patients. She now spends almost as much time walking her patients through the insurance bureaucracy than she spends on actual treatment. And it's so sad because her patients are so desperate (parents of extremely sick children), but often get nothing but bureaucratic run-around from their private insurers. So yeah, it's been a lose-lose situation since private insurance took over.
- heyitsmedotjayb 7mo ago
  At least those parents have the freedom to choose which animated 3d mascot is on their insurance paperwork.
joe_mamba 7mo ago
>Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. That's the reason why a lot of inefficiencies are kept in countries around the world: it keeps people employed and moves money through the economy. If broken things were suddenly to be made efficient overnight, the government wouldn't be able deal with masses of angry people/voters suddenly out of a job.
- missingdays 7mo ago
  And they say there's no socialism in the US
- roenxi 7mo ago
  The sentiment reminds me of the people who believe that having so much prosperity that people feel comfortable not working all year around... represents some terrible threat that must be vigorously resisted for the greater good! Think of what it would do to the poor metrics. Literal overnight change might be too radical (although, frankly, I'd want to see some academic work on the matter because it sounds like it might work - typically the problem seems to be that the body politic tries every alternative but good policy first then blames the mess on freedom) but people who are scared of rapid improvement because they don't like change are a massive threat to human prosperity and really shouldn't be left in charge of anything important. Delaying the industrial revolution was never a good choice at any point in human history. The potential gains from efficiency are unbelievably large.
  - joe_mamba 7mo ago
    >not working all year around Keeping people employed through inefficient bullshit jobs is better for the government than paying them to sit at home, since this way you have control over their livelihoods and their votes.
    - pif 7mo ago
      In civilised places, the government is the people. And civilised people know they are the government.
friendzis 7mo ago
> The time burden on physicians is staggering — estimated at $68,000 per physician per year spent dealing with billing-related administrative matters Having had my share in the administrative part of the medical field, that figure is most probably somewhat misleading. Every time you deal with billing you are bound to deal with granularity. On one extreme you could bill per case, on the other extreme you can count the paperclips used. It could seem at the first glance that the more you move towards the latter, the more time has to be spent by someone to somehow eventually form the invoice. However, this surface-level conclusion misses the fact that patient care does not start and stop at the the operating room door. Some processes mandate transparency/traceability and thus documenting what's being done and used is part of the process anyway. [edit: the final deliverables are not a treated patient, but rather a treated patient and documentation complete with medicine authorizations / prescriptions (including for drugs used internally), sick-leave certificates, etc.]. That data is then effectively reused for billing, with minimal overhead hopefully. Yes, there's a lot of room for improvement and automatization, but activities not directly related to active care make up a sizable portion of the time.
mlrtime 7mo ago
Isn't this true across other sectors as well? NYC DOE spends $42,000 per child on education ~half of that is administration costs. https://apps.schools.nyc/dsbpo/sbag/default.aspx?DDBSSS_INPUT=M290&fy=2025 https://apps.schools.nyc/dsbpo/sbag/default.aspx?DDBSSS_INPU...
- apical_dendrite 7mo ago
  Where are you getting that from the link that you shared (which is one specific school)? The link you shared shows a figure of $34k and doesn't show a clear breakdown of administrative vs non-administrative costs. The closest I can see in that link is that $13k/$34k is allocated to central services, but most of that cost goes to things like the school buses and the cafeteria and the security guards, which are direct services to students, not administrative overhead. They just are run at the system level, not the individual school level.
- projektfu 7mo ago
  I didn't see those figures in your link. It looks like $34,000 is the per capita funding of that school, and it wasn't really broken down into administrative or not.
- LorenPechtel 7mo ago
  Huge data problem here. How much of it is special education? There's a huge division here, the per-capita spending is not remotely what is spent on the average student in the classroom.
gorbachev 7mo ago
> Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider. Yet we're ok with spending trillions on AI to eliminate jobs everywhere, including healthcare. I don't think that's the reason. Personally I'm of the opinion the reason it isn't being solved, is because the people whose job it would be to solve it get to keep their jobs due to donations from pharma and insurance companies.
- tartuffe78 7mo ago
  Well right, people lobby not to change anything because they have giant companies that make them money. They need all those people in jobs to help them deny claims, identify fraud, waste, etc.
  - a123b456c 7mo ago
    If Intuit and other tax preparers can protect their tax preparation rents at the expense of all income earners, then it is not difficult to believe that the medical industry is also able to protect its own rents.
steveBK123 7mo ago
Middle men in processes add overhead, but on various analyses I've seen.. zeroing all middleman (insurance, PBM, etc) out still leaves us as far more expensive than the rest of the rich world. One thing which is not terribly popular to point out is that at least on procedure pricing - wages are way way higher here. Some of that is that education is far more expensive so then we need to pay very well to pay that down. Also we have a cartel that limits the number of medical graduates. NYC have been striking and to quote the union-friendly NYT "The three hospital systems affected by the strike said their nurses on average make about $160,000 a year and are seeking raises that could propel nurses’ salaries on average past $200,000, according to the hospitals." By comparison UK pays nurses like US blue state fast food workers. Per google - "Average nurse salaries in London are the highest in the UK, generally ranging from £37,000 to £55,000 per year." Note NYC minimum wage is at $17/hr though many hospitality workers in the $20s, with a renewed Mamdani push to $30/hr minimum. And US tax rates at these 3-4x higher compensation levels are same/lower than the UK.. Then add Americans having generally unhealthier lifestyles, being more litigious requiring higher malpractice insurance, etc..
- bigfudge 7mo ago
  Malpractice insurance is a big part of the higher salaries.
  - lII1lIlI11ll 7mo ago
    Care to provide reference for your claim? AFAIK malpractice insurance for nurses is quite cheap.
- shimman 7mo ago
  Why are we attacking literal healers that want to be compensated fairly and have better standards for their patients? The US is being pilfered by like less than 10,000 people so the federal government can give them corporate welfare worth $50 trillion over the decades [1] at the expense of workers. But yeah... it's those damned nurses wanting to have fair wages and working hours that are the true enemy not the ghouls in SV that profit off of human misery... it's the nurses... The idea that healthcare needs to be profit driven should be an idea excised from our collective intelligence. [1] https://time.com/5888024/50-trillion-income-inequality-america/ https://time.com/5888024/50-trillion-income-inequality-ameri...
helsinkiandrew 7mo ago
> Administrative spending accounts for between 15% and 30% of total medical spending Healthcare is nearly 20% of GDP (and growing), so administration is 3%-6% of the US economy!
heyitsmedotjayb 7mo ago
> Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider. Why not simply hire them to do something that isn't pointless - like dig ditches or clean garbage
- nullpoint420 7mo ago
  You could say the same to tech workers after AI.
  - lII1lIlI11ll 7mo ago
    Do you expect US government to create a huge regulated industry similar to health insurance to keep tech workers employed?
  - pessimizer 7mo ago
    So what? Are you arguing that since we think we're all special that we should be accepting that other people think they're special? Meanwhile, people getting laid off (just so the jobs could be exported to countries with more poverty and lower pollution, worker's rights, and standards for working conditions) were getting berated that they should "learn to code" for decades, while we laughed and discussed our stock options.
    - nullpoint420 7mo ago
      > while we laughed and discussed our stock options. We? Sorry, I'm one of the "newer" engineers that joined the industry right before the AI bubble. I didn't laugh or discuss my stock options. I accepted what jobs were available post-COVID crash.
  - orangecat 7mo ago
    And you'd be right. Forbidding efficiency improvements in order to preserve jobs is the correct solution approximately never.
rexroad 7mo ago
Those figures are consistent with what Issue #5 (still a couple weeks out) of this series computes from CMS NHE 2023 data and OECD health statistics. The 10-peer OECD average lands at $884 per capita, putting the US at 5.6x. Scaled to 335M people, that's $1.37T in excess admin annually. The Woolhandler/Himmelstein 2020 figure ($812B) updates to $1.13-1.66T in 2023 dollars when adjusted for healthcare inflation. The CMS narrow admin estimate ($410B) plus CAP's billing complexity analysis ($496B) gives a $906B floor. Those three methodologies agree on the floor, disagree on the ceiling. Issue #5 covers all three and explains why the range is so wide. Coming soon.
paulddraper 7mo ago
> Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider. This is legitimately mentioned in the industry. Imagine the "you need developers!" crowd on HN, but 5x stronger.

jimt1234 7mo ago

I witnessed this devolution with my GF. She's a medical provider in CA that, since the mid-90's, got her funding from a state agency. She met with the agency once per quarter, reviewed her funding claims, worked out any discrepancies one-on-one, in-person with her representative. Worked great. Then private insurance muscled their way in. It's been a bureaucratic nightmare ever since. She had to hire a full-time staffer just to handle all the insurance BS. She never needed that before private insurance. The nightmare isn't just for her; it's also for her patients. She now spends almost as much time walking her patients through the insurance bureaucracy than she spends on actual treatment. And it's so sad because her patients are so desperate (parents of extremely sick children), but often get nothing but bureaucratic run-around from their private insurers. So yeah, it's been a lose-lose situation since private insurance took over.

heyitsmedotjayb 7mo ago
At least those parents have the freedom to choose which animated 3d mascot is on their insurance paperwork.

joe_mamba 7mo ago

>Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. That's the reason why a lot of inefficiencies are kept in countries around the world: it keeps people employed and moves money through the economy. If broken things were suddenly to be made efficient overnight, the government wouldn't be able deal with masses of angry people/voters suddenly out of a job.

missingdays 7mo ago
And they say there's no socialism in the US
roenxi 7mo ago
The sentiment reminds me of the people who believe that having so much prosperity that people feel comfortable not working all year around... represents some terrible threat that must be vigorously resisted for the greater good! Think of what it would do to the poor metrics. Literal overnight change might be too radical (although, frankly, I'd want to see some academic work on the matter because it sounds like it might work - typically the problem seems to be that the body politic tries every alternative but good policy first then blames the mess on freedom) but people who are scared of rapid improvement because they don't like change are a massive threat to human prosperity and really shouldn't be left in charge of anything important. Delaying the industrial revolution was never a good choice at any point in human history. The potential gains from efficiency are unbelievably large.
- joe_mamba 7mo ago
  >not working all year around Keeping people employed through inefficient bullshit jobs is better for the government than paying them to sit at home, since this way you have control over their livelihoods and their votes.
  - pif 7mo ago
    In civilised places, the government is the people. And civilised people know they are the government.

friendzis 7mo ago

> The time burden on physicians is staggering — estimated at $68,000 per physician per year spent dealing with billing-related administrative matters Having had my share in the administrative part of the medical field, that figure is most probably somewhat misleading. Every time you deal with billing you are bound to deal with granularity. On one extreme you could bill per case, on the other extreme you can count the paperclips used. It could seem at the first glance that the more you move towards the latter, the more time has to be spent by someone to somehow eventually form the invoice. However, this surface-level conclusion misses the fact that patient care does not start and stop at the the operating room door. Some processes mandate transparency/traceability and thus documenting what's being done and used is part of the process anyway. [edit: the final deliverables are not a treated patient, but rather a treated patient and documentation complete with medicine authorizations / prescriptions (including for drugs used internally), sick-leave certificates, etc.]. That data is then effectively reused for billing, with minimal overhead hopefully. Yes, there's a lot of room for improvement and automatization, but activities not directly related to active care make up a sizable portion of the time.

mlrtime 7mo ago

Isn't this true across other sectors as well? NYC DOE spends $42,000 per child on education ~half of that is administration costs. https://apps.schools.nyc/dsbpo/sbag/default.aspx?DDBSSS_INPUT=M290&fy=2025 https://apps.schools.nyc/dsbpo/sbag/default.aspx?DDBSSS_INPU...

apical_dendrite 7mo ago
Where are you getting that from the link that you shared (which is one specific school)? The link you shared shows a figure of $34k and doesn't show a clear breakdown of administrative vs non-administrative costs. The closest I can see in that link is that $13k/$34k is allocated to central services, but most of that cost goes to things like the school buses and the cafeteria and the security guards, which are direct services to students, not administrative overhead. They just are run at the system level, not the individual school level.
projektfu 7mo ago
I didn't see those figures in your link. It looks like $34,000 is the per capita funding of that school, and it wasn't really broken down into administrative or not.
LorenPechtel 7mo ago
Huge data problem here. How much of it is special education? There's a huge division here, the per-capita spending is not remotely what is spent on the average student in the classroom.

gorbachev 7mo ago

> Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider. Yet we're ok with spending trillions on AI to eliminate jobs everywhere, including healthcare. I don't think that's the reason. Personally I'm of the opinion the reason it isn't being solved, is because the people whose job it would be to solve it get to keep their jobs due to donations from pharma and insurance companies.

tartuffe78 7mo ago
Well right, people lobby not to change anything because they have giant companies that make them money. They need all those people in jobs to help them deny claims, identify fraud, waste, etc.
- a123b456c 7mo ago
  If Intuit and other tax preparers can protect their tax preparation rents at the expense of all income earners, then it is not difficult to believe that the medical industry is also able to protect its own rents.

steveBK123 7mo ago

Middle men in processes add overhead, but on various analyses I've seen.. zeroing all middleman (insurance, PBM, etc) out still leaves us as far more expensive than the rest of the rich world. One thing which is not terribly popular to point out is that at least on procedure pricing - wages are way way higher here. Some of that is that education is far more expensive so then we need to pay very well to pay that down. Also we have a cartel that limits the number of medical graduates. NYC have been striking and to quote the union-friendly NYT "The three hospital systems affected by the strike said their nurses on average make about $160,000 a year and are seeking raises that could propel nurses’ salaries on average past $200,000, according to the hospitals." By comparison UK pays nurses like US blue state fast food workers. Per google - "Average nurse salaries in London are the highest in the UK, generally ranging from £37,000 to £55,000 per year." Note NYC minimum wage is at $17/hr though many hospitality workers in the $20s, with a renewed Mamdani push to $30/hr minimum. And US tax rates at these 3-4x higher compensation levels are same/lower than the UK.. Then add Americans having generally unhealthier lifestyles, being more litigious requiring higher malpractice insurance, etc..

bigfudge 7mo ago
Malpractice insurance is a big part of the higher salaries.
- lII1lIlI11ll 7mo ago
  Care to provide reference for your claim? AFAIK malpractice insurance for nurses is quite cheap.
shimman 7mo ago
Why are we attacking literal healers that want to be compensated fairly and have better standards for their patients? The US is being pilfered by like less than 10,000 people so the federal government can give them corporate welfare worth $50 trillion over the decades [1] at the expense of workers. But yeah... it's those damned nurses wanting to have fair wages and working hours that are the true enemy not the ghouls in SV that profit off of human misery... it's the nurses... The idea that healthcare needs to be profit driven should be an idea excised from our collective intelligence. [1] https://time.com/5888024/50-trillion-income-inequality-america/ https://time.com/5888024/50-trillion-income-inequality-ameri...

helsinkiandrew 7mo ago

> Administrative spending accounts for between 15% and 30% of total medical spending Healthcare is nearly 20% of GDP (and growing), so administration is 3%-6% of the US economy!

heyitsmedotjayb 7mo ago

> Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider. Why not simply hire them to do something that isn't pointless - like dig ditches or clean garbage

nullpoint420 7mo ago
You could say the same to tech workers after AI.
- lII1lIlI11ll 7mo ago
  Do you expect US government to create a huge regulated industry similar to health insurance to keep tech workers employed?
- pessimizer 7mo ago
  So what? Are you arguing that since we think we're all special that we should be accepting that other people think they're special? Meanwhile, people getting laid off (just so the jobs could be exported to countries with more poverty and lower pollution, worker's rights, and standards for working conditions) were getting berated that they should "learn to code" for decades, while we laughed and discussed our stock options.
  - nullpoint420 7mo ago
    > while we laughed and discussed our stock options. We? Sorry, I'm one of the "newer" engineers that joined the industry right before the AI bubble. I didn't laugh or discuss my stock options. I accepted what jobs were available post-COVID crash.
- orangecat 7mo ago
  And you'd be right. Forbidding efficiency improvements in order to preserve jobs is the correct solution approximately never.

rexroad 7mo ago

Those figures are consistent with what Issue #5 (still a couple weeks out) of this series computes from CMS NHE 2023 data and OECD health statistics. The 10-peer OECD average lands at $884 per capita, putting the US at 5.6x. Scaled to 335M people, that's $1.37T in excess admin annually. The Woolhandler/Himmelstein 2020 figure ($812B) updates to $1.13-1.66T in 2023 dollars when adjusted for healthcare inflation. The CMS narrow admin estimate ($410B) plus CAP's billing complexity analysis ($496B) gives a $906B floor. Those three methodologies agree on the floor, disagree on the ceiling. Issue #5 covers all three and explains why the range is so wide. Coming soon.

paulddraper 7mo ago

> Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider. This is legitimately mentioned in the industry. Imagine the "you need developers!" crowd on HN, but 5x stronger.