Administrative Inefficiency and The United States Healthcare System

Abstract

Administrative inefficiency undermines the US healthcare system by inflating the cost while reducing the quality of care. The snowball effect ultimately costs time and money to both the patients and the health care professionals alike. An exhaustive literature search identified administrative complexity inherent to the multi-payer system and the lack of incentive by firms to economize due to misaligned incentives as the primary cause of administrative inefficiency in the US. Administrative complexity has also been shown to deter lower-income and marginalized populations from getting access to care leading to a poor health matrix. Similarly, misaligned incentives result in a ballooning of health care expenditure. It is only sensible to infer that a multi-faceted approach would be needed to address administrative inefficiencies. First, legislation at the federal level is necessary to improve standardization and simplification of all health administrative activities, e.g., prior authorization, quality reporting, etc. Additionally, the promotion of proper economic incentives through legislation can be used to reduce market failures that exist in healthcare while providing the financial pressure for firms to streamline administrative tasks. Second, the promotion of high-productivity innovation, which is disruptive, is necessary to reduce costs, which improves administrative efficiency. Legislation should take guidance from other successful healthcare systems which demonstrate efficiency, e.g., the Netherlands. However, this should be done with utmost attention to the current climate of the US Healthcare system. Similarly, health care innovation should be done with an eye on practicality and cost reduction.