The Complexity Of Billing And Paying For Physician Care

TLDR

Administrative costs of US health insurance are high, yet their determinants remain poorly understood. The study develops new measures of physician billing complexity across insurers and time, and estimates them using 2013–2015 remittance data. Billing complexity is quantified by analyzing a large sample of detailed insurance remittance data from 2013–2015 across insurers. Billing complexity varies widely: fee‑for‑service Medicaid has a denial rate 17.8 percentage points higher than fee‑for‑service Medicare, managed‑care Medicaid 6 points higher, while private insurance is similar to Medicare Advantage; the sector faces $11–$54 billion in challenged revenue annually, affecting insurance reform analyses.

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.