Matthew Fiedler’s testimony on administrative burden in health care

Chair Van Duyne, Ranking Member Mfume, and members of the subcommittee, thank you for inviting me here today. My name is Matthew Fiedler, and I am a health economist and a Senior Fellow with the Schaeffer Initiative on Health Policy at the Brookings Institution. My research focuses on a range of topics in health care policy, including health care provider payment and health insurance regulation.

My testimony will examine the administrative costs that health care providers incur to interact with health insurers (including both public insurers like Medicare and Medicaid and private insurers), as well as how public policy can reduce those costs. I will make four main points:

1. Health care providers incur substantial costs to interact with insurers, likely totaling hundreds of billions of dollars per year, costs that are ultimately borne in large part by consumers and taxpayers. Costly activities include negotiating contracts, collecting information about patients’ insurance coverage, obtaining prior authorization for care, submitting claims for payment, and reporting on quality performance. There are likely economies of scale in performing many of these activities, so the associated administrative burdens likely fall more heavily on smaller providers than on larger.
2. Many administrative processes serve valuable purposes, so efforts to reform them can involve tradeoffs and should be approached thoughtfully. For example, it is essential to have some set of procedures for compensating providers. Similarly, insurers’ prior authorization requirements can prevent delivery of inappropriate services, and audit processes can be effective tools for identifying and deterring fraud.
3. Certain targeted reforms could reduce administrative burdens with few substantive downsides. One is eliminating Medicare’s Merit-Based Incentive Payment System, which places large reporting burdens on clinicians, with few benefits. Another is replacing the cumbersome arbitration process that is used to determine payment rates for certain out-of- network services under the No Surprises Act with a simpler “benchmark” payment A third is reforming Medicare Advantage’s risk adjustment system to reduce plans’ ability to increase their payments by documenting additional diagnoses.
4. Standardizing billing, coverage, and quality reporting rules across insurers could generate larger savings but would also present more significant tradeoffs. Changes like these could help address a major reason that administrative burdens are larger in the United States than in other countries: the wide variation in rules across the United States’ many public and private insurers. However, mandating greater standardization would also limit insurers’ ability to tailor rules to their unique circumstances or experiment with novel approaches. Setting rules through a centralized process might also produce rules that are systematically better or worse than current rules.

The remainder of my testimony will examine these points in greater detail.

Read the full testimony here.

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