Here’s a health insurance headache most readers can relate to: My son took a bad fall in an indoor soccer game this winter and fractured his wrist and pinkie toe. He was diagnosed and treated in a specialized emergency room at an orthopedic hospital that accepted our health insurance; in total we were there a very reasonable two hours and my son left sporting a wrist cast, sling and a surgical shoe. Before leaving I stopped by the reception desk to find out about co-payments and other charges we might have incurred: “Don’t worry,” the billing clerk told me, “we will submit all the charges to your insurance.”
The wrist healed quickly, the surgical shoe was abandoned after two days and my son eagerly went back to bouncing off the gym walls. Then the bill from the emergency room came. Among the assorted charges not covered by our insurance was $218 for a “short leg splint calf to foot.” As I mentioned, we left with a “shoe” that consisted of an inflexible sole held in place by Velcro straps—definitely not a “short leg splint.” As my family’s de facto health advocate who has spent countless hours battling overcharges, coverage denials and outright billing errors, I assumed a phone call to the billing service would clear this up. Well, five months and two subsequent statements later, I’ve just received “final notice” that if I don’t pay the splint charge it will be sent to a collection agency.
Undoubtedly there are few among us who haven't encountered similar insurance hassles; substitute blood test, MRI, anesthesia, out-of-network provider, brand-name drug or any number of medical devices or interventions for “short leg splint” and this becomes a universal tale. For cancer patients and those undergoing surgery and hospitalization these disputed charges become a more serious problem, adding up to tens of thousands of dollars in potential debt.
As has been the case with most of the coverage denials I’ve dealt with over the years, this current billing headache will likely be caused by a coding error that originated either at the provider or as my claim worked its way through the inner workings of our insurer. When doctors or hospitals bill insurers for their services, they must assign a code for each and every procedure, device, medication and test administered. Insurers process these codes with an eye trained on ferreting out discrepancies and (so it often seems) finding reasons to deny coverage or delay payment.
According to the American Medical Association (AMA), this process is far from efficient and quite error-prone. The doctor’s group released its annual National Health Insurer Report Card this week and found that 19.3%—almost one in five—of medical claims processed by the nation’s largest commercial health insurers is inaccurate. The report card found a 2% rise in claims processing errors over last year’s findings, which added “an estimated $1.5 billion in unnecessary administrative costs to the health system,” according to the AMA. The doctors' group estimates that if all health insurers were able to eliminate all claim payment errors, the health care system would save $17 billion a year.
Where would these savings take place? The AMA calculates that doctors’ offices spend an average of 20-plus hours each week dealing with what are called “claim edits.” In health insurance parlance these “edits” are basically discrepancies that arise between charges submitted by a provider and an insurer’s catalogue of covered services and interventions. When a claim receives an edit, it is kicked back to the provider (and usually the plan’s beneficiary) with a “reason code” for why the claim was rejected. Most often this occurs when a subscriber is deemed ineligible for coverage, or the medical coding doesn’t jive with a particular procedure, or if the charge submitted is not compatible with a negotiated rate, or the patient needed to have precertification, i.e approval from his insurer before he had an MRI or surgery…and so on and so on.
This is complicated enough. But it turns out that in the world of commercial insurance, there is no standardized “claim edit library,” so providers have to submit different claims information and respond to different error codes for each of the insurers they deal with.
Just writing this is making my head spin.
Some commercial insurers are doing a better job than others: “UnitedHealthcare came out on top of seven leading commercial health insurers with an accuracy rating of 90.23 percent,” according to the AMA. “Anthem Blue Cross Blue Shield had scored the worst of those measured with an accuracy rating of 61.05 percent.”
The most surprising finding from the AMA report card? It turns out that despite all the groaning about how the government operates an overly-generous and inefficient program, Medicare has the lowest claims error rate of all the insurers scored with an average accuracy rate of over 96 percent. As Ezra Klein noted on his Washington Post blog, this isn’t because Medicare indiscriminately covers every charge, fraudulent or not; “[Medicare] has moved aggressively to adopt electronic money transfers, while major insurers like Cigna and Humana are still sending checks. And it rejects more claims than Cigna, Aetna, or really anyone but Anthem. In other words, reality defies the stereotypes.”
The takeaway message from this year’s insurer report card is that the current medical claims processing strategy is still too labor-intensive, error-prone and far too fragmented. Practitioners and insurance companies must continue to adopt high-quality electronic billing and payment systems that can cut down on processing errors and remove the hassle of having to deal with both paper checks and electronic payments. The other key recommendation is that insurers adopt a standardized coding system for claims—similar perhaps to the one adopted several years ago by Medicare. The fact that a single provider could be dealing with hundreds, if not thousands, of sets of benefits for their patients is ludicrous. As Uwe Reinhardt, economics professor at Princeton and trustee of 900-bed Duke University Health System once told the Senate Finance Committee: "We have 900 billing clerks at Duke. I'm not sure we have a nurse per bed, but we have a billing clerk per bed. It's obscene."
The AMA’s report card highlights the administrative costs associated with inaccurate claims processing and focuses on the toll this takes on providers. But it generally ignores the fact that consumers are ultimately the ones left holding the bill for claims errors. If an insurer kicks back a charge and refuses payment to a provider, the responsibility shifts to us.
A report released in March from the Government Accountability Office (GAO) indicated that insurers denied coverage more frequently because of billing errors—such as duplicate claims or missing information—and for eligibility issues, (services were provided before coverage was initiated or without pre-certification) than because they deemed care medically inappropriate.
The GAO report also found that when coverage denials were appealed, they were frequently reversed in the consumer's favor. For example, data from four of the six states that participated in the agency’s study found that some 40-60% of consumer-initiated appeals resulted in the insurer reversing its original coverage denial.
In a recent article extolling the benefits of appealing an insurer’s denial, Kaiser Health News’ Michelle Andrews writes, “Claim denial rates vary significantly by insurer, according to the GAO report. In California, for example, the denial rate for six managed care insurers ranged from 6 percent to 40 percent in 2009. Whether you're insured by a plan that kicks out many claims or only a few, it may pay to appeal.” She adds, “…the odds are about 50/50 that if you appeal an insurer's decision, you'll win.”
Under the Patient Protection and Affordable Care Act, all patients will have to be notified that if a claim is denied, they have the right to an internal review by the insurer and also with an independent review board. More importantly, the health law provides $30 million for state-based consumer assistance programs that are supposed to help consumers fight denials and erroneous charges.
The Center for Medicare and Medicaid Services estimated that in 2009 private health insurers spent $471 per enrollee on administrative costs. This is a decline from a high of $507 in 2007, and will likely drop further as new provisions in the health reform law require companies to spend a larger percentage of premiums on patient care or face penalties. Achieving further cuts in the administrative costs of health care will require that insurers streamline their claims processing and convert to a more universal coding system. Only then will these savings move downstream to providers and, ultimately consumers.
In the meantime, I would hate to think that these “errors,” delays in payment and reflexive claim denials are really just ploys to increase insurer profits. So for now, I like millions of other annoyed Americans, will continue to test my endurance and keep following up on suspect medical charges and care denials. Now, when can I set aside an hour to wrangle with that collection agency?