* CHP, #3 of n
09 Oct 1993
One of the often heard supposed failures of free market medical care is that
there is high overhead for dealing with insurance paperwork. Clinton told
us that he would create big savings there to help pay for his plan.
Studies have shown the overhead cost of insurance to be 10-15%. While that's
significant, it's not a huge deal. If got rid of all of that overhead,
it would forestall the 'problem' for only two years at current rates
That the government might actually reduce paperwork is just laughable
on the face of it. I cannot believe people take that seriously. In
the recent JAMA study that showed the U.S. had more overhead than Canada,
it went unnoticed that Hawaii had the highest overhead of all states, 20%.
Hawaii is the only state with completely socialized medicine. Coincidence?
That 10% buys something too. As ugly as it is, it buys a certain amount
of cost containment because insurance companies expect procedures to be
justified. It also causes them to look for ways to reduce the cost of
treatment. They act as a watchdog for their customers.
Even if you don't believe that, here's the clincher: people want to pay
for those overheads, usually. Some doctors' offices do not file insurance
paperwork. The patient either pays his own bill or handles his own
paperwork. The cost of service at those offices is discounted by
the savings of the overhead. They should be able to advertise that
lower price so people would have a better idea what having the insurance
filed for them costs. Okay, it's only partially discounted because
my insurance premium still covers the insurance company's paperwork
costs even if I file myself.
This can work other ways too. People can buy catastrophic health
insurance and self-insure up to $10K (for instance). Since most claims
will be less than that, the majority cost of the paperwork would
be saved. People usually choose not to do that. They are willing
to pay to have the paperwork done.
Clinton tells us that by going to a single form he will eliminate
needless complication. That's just silly. Reducing claim forms to
one single form is just a drop in the bucket of paperwork costs.
But again, there is a reason for multiplicity of forms. Insurance
companies are searching for the best way to get the necessary information
while not wasting too much of their time (money) processing forms.
That different ones try different things is the market working.
Software companies compete on word processor interfaces because there
useful different things to try. But, many standardize on SQL for
a database interface. Not because they are forced to but because it
is in their own interest. The same forces are at work for standardizing
insurance claim forms.
Bottom line: the amount of paperwork that exists in a free market
exists because it serves a purpose. Government induced paperwork
serves no purpose. To replace the former with the latter is a