The Complexity Of Billing And Paying For Physician Care

Abstract

The administrative costs of providing health insurance in the US are very high, but their determinants are poorly understood. We advance the nascent literature in this field by developing new measures of billing complexity for physician care across insurers and over time, and by estimating them using a large sample of detailed insurance "remittance data" for the period 2013-15. We found dramatic variation across different types of insurance. Fee-for-service Medicaid is the most challenging type of insurer to bill, with a claim denial rate that is 17.8 percentage points higher than that for fee-for-service Medicare. The denial rate for Medicaid managed care was 6 percentage points higher than that for fee-for-service Medicare, while the rate for private insurance appeared similar to that of Medicare Advantage. Based on conservative assumptions, we estimated that the health care sector deals with $11 billion in challenged revenue annually, but this number could be as high as $54 billion. These costs have significant implications for analyses of health insurance reforms.

The Impact of Insurance Expansions on the Already Insured: The Affordable Care Act and Medicare

“…One example would be higher administrative burdens associated with Medicaid reimbursement (e.g. Gottlieb et al, 2018b). Additionally, some physicians may have received bonus payments for services to Medicare patients under a primary care incentive program in effect between 2011 and 2015.…”

“…5 While we find no change in the care supplied to Medicare beneficiaries by mid-level providers, such providers may have primarily supplied care to the newly-insured Medicaid beneficiaries. Thirdly, while our model predicts that doctors should be indifferent between Medicaid and Medicare beneficiaries when reimbursement rates are identical, there may be non-pecuniary aspects of treating Medicaid patients that make them less attractive (e.g., additional paperwork or lags in payments, see Gottlieb et al, 2018a) or additional financial benefits to treating Medicare patients (further discussed in Section II). Finally, it may be the case that physicians reduced access to care for other groups, such as the uninsured or self-pay patients, in order to see more Medicaid patients (see, e.g., Chen, 2017).…”

Sticking points: common‐agency problems and contracting in the US healthcare system

“…Eventually, the claim is adjudicated through a specified process. The claims‐based payment system is costly and slow, involving tens of billions in challenged revenues, slow payments, and a small army of administrators at insurance companies and providers to manage the process (Gottlieb, Shapiro, and Dunn, ). One can imagine moving to a more streamlined billing system in which providers simply submit bills and are reimbursed, as in conventional businesses.…”

The Costs of Payment Uncertainty in Healthcare Markets

“…Medicaid is the insurance category with the highest billing complexity (Gottlieb, Shapiro and Dunn, 2018), and we estimate that doctors' direct costs of billing Medicaid consume one-quarter of the revenue from Medicaid patients. The indirect costs arise because increased difficulty of doing business makes it less attractive to engage in economic activity (Djankov et al, 2003(Djankov et al, , 2008Besley, 2015).…”

“…We base our empirical findings on a novel type of health care data, called "remittance data", which Gottlieb, Shapiro and Dunn (2018) introduced and summarized. The remittance data allow us to observe multiple rounds of interactions between payers and physicians, along with detailed information about the medical provider, the patient, the visit, and the reasons for why payments are denied or reduced.…”