Healthcare Claims Errors Cost $17 Billion a Year

A recent American Medical Association (AMA) survey has determined that claims-processing errors by healthcare insurance companies cost the nation $17 billion a year in pointless administrative costs.  The AMA’s study is based on a random sampling of approximately 2.4 million electronic claims submitted in February and March of this year to Aetna, Anthem Blue Cross Blue Shield, CIGNA, Health Care Service Corporation, Humana, the Regence Group, United Healthcare and Medicare.  The claims were filed for more than 400 physician groups in 80 medical specialties in 42 states.

The typical claims-processing error rate was 19.3 percent, a rise of two percent over 2010 and is expected to add $1.5 billion in administrative costs this year.  “A 20 percent error rate among health insurers represents an intolerable level of inefficiency that wastes an estimated $17 billion annually,” said AMA Board Member Barbara L. McAneny, M.D.  “Health insurers must put more effort into paying claims correctly the first time to save precious healthcare dollars and reduce unnecessary administrative tasks that take time and resources away from patient care.”  To promote a more efficient claims payment system, the AMA’s National Health Insurer Report Card provides a yearly check-up for the largest health insurers and benchmarks the systems they use to manage, process and pay claims.

America’s Health Insurance Plan’s (AHIP) spokesman Robert Zirkelbach said insurers and providers must share the responsibility for improving accurate and efficient claims payment.  “According to Zirkelbach, “Health plans are doing their part by collaborating with providers and investing in new technologies to improve the process for submitting claims electronically and receiving payments quickly.  At the same time, more work needs to be done to reduce the number of claims submitted to health plans that are duplicative, inaccurate or delayed.”

Medicare came out ahead of the commercial insurers, with a 96 percent accuracy rate.  The lowest rated firm was Anthem Blue Cross, at 61 percent.  Anthem’s parent company, WellPoint Inc., is expanding electronic claims processing operation to improve accuracy.

The National Health Insurer Report Card is the basis of the AMA’s Heal the Claims Process campaign. Launched in June 2008, the campaign’s goal is to encourage improvements in the industry’s billing process so physicians and patients are no longer at the mercy of a chaotic payment system.  “In spite of notable improvements by insurers in the four years since the AMA introduced the National Health Insurer Report Card, precious healthcare resources are wasted because each insurer uses different rules for processing and paying medical claims, Dr. McAneny said.  “This variability adds no value to the healthcare system and only increases unnecessary administrative costs.”

To help physicians enhance their management of each insurer’s claims-submission requirements, the AMA’s Practice Management Center offers user-friendly online resources for preparing claims, following their progress and appealing them when necessary.  The Practice Management Center’s educational materials and practical tools are available online at

Another of the report’s findings is that physicians were not reimbursed by healthcare insurance companies on almost 23 percent of submitted claims.  The reason usually provided for non-payment are deductible requirements that shift payment responsibility to the patient until a dollar limit is met.

According to AHIP president Karen Ignani,“Administrative simplification that benefits consumers and the physicians who serve them is a top priority for our community.  Recent data from PricewaterhouseCoopers indicate administrative costs have been stable for four decades.  As a result of the move to electronic processing, the cost for each claim has actually declined, enabling insurers to provide value added services to consumers, such as disease management programs, without contributing to rising healthcare costs.  AHIP data indicate that virtually all ‘clean’ claims are processed within 30 days.

“AHIP members have worked collaboratively with physicians to make improvements in processes to promote efficiency and move to real-time payment.  In order for claims to be processed as efficiency and promptly as possible, both insurers and physicians need to strive for accuracy and timeliness.  For example, data show there is often a significant lag time between when services are provided and physician claims are submitted.  Data also indicate that there are a significant number of incomplete and duplicate claims filed.  Reports released last week decried ‘no questions asked’ reimbursement in Medicare and emphasized the need to scrutinize claims to prevent fraud.  In addition, research shows more than $200 billion is spent annually on services that are not in sync with the rigors of medical science, the result of wide variations in practice, overuse, underuse, and misuse of services.  Our view is that discussions of efficiency are important, but that they should be broad discussions of opportunities for improvement by all the responsible stakeholders.”

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