Why America’s Health System Runs On Paper

AMERDealing with medical bills, like waiting for the cable guy or buying a used car, has become a clich? of consumer exasperation. Everything from electricity and phone bills to tax returns and parking tickets migrated to electronic payments years ago, but America’s $2.9 trillion health-care economy remains stubbornly stuck in the 1990s. The number of medical bills paid by paper check through the U.S. mail has even increased while payments for all other services have decreased dramatically. Medical payments are the only category to register an increase in paperwork since the start of the 21st century:?

It?s not just consumers who are paying by mail. Just 15 percent of commercial insurers make payments to medical providers electronically, according to a report last month from PricewaterhouseCoopers Health Research Institute. The largest insurers are usually the best at going digital, but Cigna, with 14.5 million customers, sends only 39 percent of payments electronically. That’s because many doctors aren’t signed up to receive electronic transfers, according to spokesman Joe Mondy. Aetna and UnitedHealth Group, in contrast, both say around 80 percent of payments are paperless.

Hospitals, medical offices, and insurance companies need an army of workers to push all that paper1, which is also frequently shuffled through middlemen like billing agencies2 and clearinghouses3. One claims clearinghouse, Emdeon, which handles paper billing for many of its health plan clients, spent $87 million4 on postage alone in the first three months of 2015?nearly a quarter of its total revenue?according to financial filings. All this bureaucracy pushed the cost of administering private insurance to $173 billion5 in 2013, according to federal data.

But there?s also the human cost of sending people piles of indecipherable paperwork as they?re recovering from an illness or operation. ?You pull your hair and you get frustrated. You don?t understand why it?s all paper and it?s all phone calls and you waste time and you get confused, and it?s all so broken,? says Tomer Shoval, chief executive and co-founder of Simplee, one of several companies trying to streamline medical billing.?

So what’s taken so long for health-care payments to go digital? Inertia explains a lot of the delay. Doctors and health plans have to invest in technology to allow electronic payments, and smaller concerns?the solo practitioner or local health plan?may not think it’s worth it. Many physicians have only recently switched to digital health records. And unlike other industries such as banking and telecom, where companies compete for customers on price, medical providers and health plans have long been able to pass the costs of their inefficiency onto customers with little consequence.

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