The Senate health committee on Tuesday mulled creating legislation to regulate how health insurers handle prior authorizations.
In a hearing on healthcare administrative costs, Harvard economics professor David Cutler urged the senators to consider policies for HHS to standardize and streamline billing systems within the next five years. He recommended that the federal government standardize prior authorization forms for all insurers, eliminate extraneous billing codes and direct the integration of electronic health records and billing systems so a patient's health history is automatically linked to authorization of treatment.
Cutler estimated these proposals could cut the health system's administrative costs in half and bring down overall costs by 8% to 15%. But the government would have to lead the way with policy: individual companies can't do it on their own, he said.
"The government is biggest payer, so it has to help," Cutler said. "The single biggest payer is the one who has to standardize and simplify coding."
The health insurance industry drew particular criticism from the panel for the way it currently treats prior authorizations. Lawmakers including Sens. Lisa Murkowski (R-Alaska), Bill Cassidy (R-La.) and Maggie Hassan (D-N.H.) noted that insurers' verification requirements can place undue burden on patients and physicians while also threatening delays in care.
As policymakers circled around the idea of standardizing those requirements for all carriers, America's Health Insurance Plans CEO Matt Eyles asked them not to take a heavy hand when it comes to regulating how insurers manage different populations.
Cutler acknowledged his ideas for standardizing these requirements will take time to gain traction. The insurance industry would face the same big IT overhaul that providers face with meaningful use.
"Resistance isn't quite the word, it's more reluctance," Cutler told the panel when Sen. Tina Smith (D-Minn.) asked him whether standardization was likely to get pushback. "To a great extent (the reluctance) comes from insurers because they have customized their own systems, and they do it for each individual business. The cost of change is what's staring them in the face."
He added that once providers buy into electronic health records "they are glad they did so. It's just a question of getting over the hump."
But as lawmakers focused on new regulation, albeit on the payer side, at least one witness was frustrated they didn't discuss offering relief from existing rules.
Becky Hultberg, president and CEO of the Alaska State Hospital & Nursing Home Association, told Modern Healthcare after the hearing that she would have liked the panel to discuss how expensive it is for hospitals to participate in Medicare. As a representative of the country's most costly state healthcare system, she repeatedly detailed in her testimony the difference in the cost of federal compliance for Alaska's small rural providers and that of large hospital systems in populous states.
In particular, she highlighted one of her critical-access hospitals—Wrangell Medical Center, located on a small island—which earlier this year had cash reserves to keep the doors open for eight or nine days and was preparing to spend $65,000 on IT to meet the third phase of federal meaningful use requirements that she said will build out a system the medical center doesn't need.
According to a 2017 analysis from the American Hospital Association, 65% of the nearly $40 billion hospitals spend each year on regulatory compliance is split between the CMS' rules for Medicare and billing verifications.
In her testimony, Hultberg agreed with other witnesses that the federal government needs to set standards for billing systems, but said the CMS also needs to follow them.
"There needs to be more alignment with private payers around pre-authorization and billing, not just with private payers but with the federal government as well," she said. "The federal government, with the many ways it funds healthcare, doesn't handle these things consistently."
Robert Book of the think tank American Action Forum cited his own research findings that show Medicare shoulders as much responsibility for administrative costs as private payers. Paperwork accounts for 2% of Medicare spending, compared to 10% to 20% for private insurance. But Book said in real dollar terms Medicare per-person administrative costs skew higher than private insurance costs: roughly $509 per person per year for Medicare as opposed to $453 per person per year for private insurance. The percentages are misleading because they don't reflect the fact that Medicare is by far the biggest payer, Book said.