Time Capsule: If Uncle Sam Doesn’t Like Healthcare Administrative Costs, Why Did He Create Them?

I wrote weekly editorials for a boutique industry newsletter for several years, anxious for both audience and income. I learned a lot about coming up with ideas for the weekly grind, trying to be simultaneously opinionated and entertaining in a few hundred words, and not sleeping much because I was working all the time. They’re fun to read as a look back at what was important then (and often still important now).

I wrote this piece in June 2008.

If Uncle Sam Doesn’t Like Healthcare Administrative Costs, Why Did He Create Them?
By Mr. HIStalk

Want to defraud Medicare? Apparently it isn’t very hard. A recent high school dropout started punching in fraudulent claims from a kitchen table laptop and didn’t stop until she hit $100 million worth, many of them paid without question. Another news story talked about hospitals that have been charged with overbilling the government, insinuating they did it intentionally.

Certainly there are plenty of crooks in healthcare and I hope they’re all locked up. On the other hand, the payment system is extraordinarily convoluted and complex. Put a microscope to the high volume of transactions submitted by the average hospital and a sharp auditor could no doubt find a few inaccurate ones. It’s just electronic claims Nintendo, moving imaginary paper back and forth with little added value, so it’s not perfect.

It’s like the tax system. Magazines used to take fictitious family situations and ask big-name accountants to figure their tax liability. The results were all over the place, with each accountant defending his or her interpretation of the tax code. Nobody could say for sure what the right answer was. You can bet, though, that if you’re audited, that low-ranking civil servant who’s making you sweat will pick a big number and it’s up to you to argue otherwise. They don’t see it as your money at all.

The common element is the federal government and its entourage of special interest groups, lobbyists, and consultants. They don’t have an incentive to make anything simple, especially if that would result in claims getting paid more generously or quickly.

Besides, the government is going broke, mired in national debt that would take generations to pay off even if the federal budget were balanced today. Paying less than providers bill or deserve buys the politicians a little more time before the economy goes up in flames.

Old-timers remember that hospitals first bought computers to support complicated Medicare reimbursement. It was like an arms buildup, though. Once Uncle Sam got computers of its own, we were back to square one. The government demands the most tedious, obscure, and hard-to-capture information from providers, even though nothing useful ever seems to come from it.

They created the nightmare that is healthcare billing, a nasty by-product of what a lot of folks back then called a socialist experiment in which politicians inserted themselves between providers and patients. With that came insurance companies and a never-ending increase in costs.

Think about that the next time a gasbag politician starts whining about the administrative costs of healthcare and the huge chunk of GDP they consume. Uncle Sam, as the biggest payor, is the also most demanding, bureaucratic, and arrogant. On top of that, it blames providers for being inefficient. Can you imagine?

I’m glad the government is occasionally and uncharacteristically prudent. Sometimes it seems it has gone beyond that in healthcare. You get the feeling that it can’t afford the care that politicians have promised to voters and the only way to hide that fact is to intentionally pay providers less than they are entitled.

On the other hand, be careful not to make a mistake. Once you hit $100 million or so, somebody might start asking questions.