confirmation of judge kavanaugh. watch live on c-span2, c- span.org, or listen on the free c-span radio app. healthcare industry leaders and economic scholars testified on capitol hill earlier this summer. they discussed ways to reduce administrative cost in healthcare. next we will show you the senate healthcare and labor relations hearing. it runs about an hour and 40 minutes. >> the senate committee will come to order. senator murray and i will make an opening statement and then i will introduce the witnesses. the senators will then have five minutes to ask questions. this is our third hearing on reducing healthcare costs. at our last hearing, it was

testified that a minimum of 30% and is much as 50% of healthcare spending is waste. he is a member of the institute of medicine. we had a panel of equally impressive witnesses and no one really disagreed. at that hearing, we focused on reducing what we spend on healthcare by examining two things. one, reducing unnecessary tests, services, procedures and drugs, and, number two, how do we reduce preventive care. today we are examining administrative costs, which includes everything from filling out insurance claims to buying software for electronic healthcare systems. administrative costs are much higher in the united states than other countries, according to a witness at our first

hearing. administrative cost account for 8% of all healthcare spending in the u.s., roughly $264 billion, compared to only 1 to 3% for other countries. while many administrative tasks come from outside the federal government, such as insurance companies or state requirements, the federal government is clearly at fault for some of this burden. there was a lot of excitement over electronic healthcare records in washington dc. many said these systems would make it easier for doctors and patients to access records and share information with other doctors. since 2011, the federal government spent $38 million requiring doctors and hospitals to install electronic health record systems through the meaningful use program in medicare and medicaid. the federal government provided payment to buy those systems and created a specific requirement for how doctors

must use the systems, penalizing doctors who didn't comply. unfortunately, those record systems have ended up being something physicians dread, rather than a tool that is useful. for example, a family physician who chairs a residency program with three clinics in the tri- cities area of east tennessee is required to have an electronic health record system because he sees medicare and medicaid patients. he initially received payments from the federal government to implement the health record system, but now he has to pay a monthly maintenance fee to a health record company, as well as paying for periodic upgrades to the system. all of these costs add up to being far more expensive than the paper records he used to keep were the initial payment the government provided. he still isn't able to see the electronic health record of a patient discharged from a

hospital across the street. that is because the software doesn't use -- because the hospital doesn't use the same software. instead he has to call the hospital and have paper copies faxed to his office. there is technology he could buy to make his electronic health record system communicate with the local hospital health record system, so we wouldn't have to have them fax the record to his office, however he would have to pay $300 a month to the electronic health record company for each of the 88 doctors and nurses in his practice. what this means is for his 88 doctors and nurses, he would have to spend $26,400 per month, $316,800 per year, just as he has patient's electronic health records from the hospital across the street or other doctors. the electronic health record system which was supposed to make things easier and simpler

has instead made record-keeping more expensive and he still cannot see the records of a patient released from the hospital he can see from his office window. this is just one example of how well intentioned ideas can turn out to add to the administrative burden that doctors face. according to the american hospital association, there are 629 different regulatory requirements from four different federal agencies that doctors, hospitals and other healthcare providers have to comply with. these range from credentials for doctors and nurses to participate in medicare and maintaining compliance to privacy laws, to making sure the right signs are hanging around a doctor's office. the average community hospital needs 23 full-time employees to keep up with the regulations about what a hospital needs to do to participate in medicare,

called conditions of participation, according to the american hospital association. when the federal government adds one more question or one more rule, it may not seem like it makes much of a difference, but added together for doctors and hospitals, those questions and rules that up to more time spent on paperwork, less time seeing patients and an increase to the cost of healthcare. the trump administration is looking at what administrative tasks are required by the federal government. i am glad to see the administrator of cms which oversees medicare and medicaid recently proposed streamlining many of the agencies burdens and reporting requirements. this is one step. i look forward to hearing more about what the federal government can do to reduce administrative tasks today. as we look at reducing costs, we should keep in mind that what seems like a good idea or magic bullet in washington, dc may result in something different for doctors, nurses and hospitals.

senator murray. >> thank you, mister chairman. i am glad we are continuing the discussion on healthcare cost. i know i constituents and people across the country are very concerned and i look forward to hearing from all of our witnesses today about the way administrative costs fit into the big picture. i believe there are opportunities here to reduce healthcare costs, while maintaining quality and safety for patients. we know the current administrative system is fragmented with different federal, state and private protocols. i am interested to hear from our witnesses about ideas to simplify, while making sure patients get safe, quality care and service. unfortunately, president trump is pursuing a path of healthcare sabotage, including

ideas that will make this problem worse. in fact, the office of management and budget is currently reviewing a new sabotage step that will do more to allow insurance companies to offer junk plans that not only undermine important protections for people with pre-existing conditions, but also ignore requirements that insurers spend most of their time on patients, not administrative costs or bonuses. an analysis shows the most popular short-term plans, like the ones president trump wants to expand, spend on average, half of their revenue on things that have nothing to do with patient healthcare needs. in other words, president trump wants to make it easier for insurance companies to discriminate against people with pre-existing conditions and award themselves bonuses. i think we can all agree we should be looking at steps to make healthcare more affordable

and in this idea from president trump i believe is a step in the wrong direction. unfortunately, efforts to raise healthcare cost have become par for the course. from day one, president trump has focused on rolling back healthcare and protections for people with pre-existing conditions, even though people across the country have rejected that agenda. like a year ago, when they stood up and spoke out against the bill that tried to get medicaid and put families back at the mercy of big insurance companies, who could jack up prices for people with pre- existing conditions. unfortunately, those efforts failed. so now the president has decided to sabotage healthcare from the oval office, instead. he dramatically cut investments to help people understand their healthcare options. he pushed a tax bill that has lower rates for insurers and

drug companies and higher rates for families. he handed the reins back to drug companies by making it easier to dodge coverage for those with pre-existing conditions, women, seniors. he had his justice department take the heil days take the highly unusual step. now the -- he had his justice department take the highly unusual step. i hope republicans join us in rejecting his nomination, just like they joined us in rejecting trump care, when it threatened our families across the country. i hope they will come back to work with us to bring down healthcare costs. i know in my state they are

counting on it and i have no doubt patients across the country feel the same way. >> thank you. we will now introduce the witnesses. our first witness has come a long way. >> thank you, mister chairman. i think you for including on this panel, becky holds berg. -- becky holds berg. she has been not only a great friend to my office, but a strong leader in alaska. she is the president and ceo of the alaska state hospital and nursing home association. prior to this, she served as the administrator under the governor, where she provided business support services to our state government. the department also oversees management of the active and retiree health plans for over 80,000 covered lives. she also served as the regional

director for marketing for providence health services alaska. she had an extraordinary depth of understanding of the associated healthcare costs. in rural states. and recognizing some of the challenges we have heard before. i have attempted to outline them. and the impact to our smaller facilities, our remote facilities. she brings extraordinary experience to the committee, so i appreciate that we will have her voice added to this discussion. as to how we can work to disgrace -- work to decrease the overall healthcare cost. thank you, mister chairman, and i work -- and i look forward to the comments and i appreciate her making the long haul from

alaska. >> thank you. our second witness will be the president and chief executive officer of america's health insurance plans, the trade association representing health insurance providers. previously he held a variety of other positions at other companies. earlier he worked for the congressional budget office. doctor david cutler, our next witness is a professor of applied economics at harvard. he served on the council of economic advisers during the clinton administration. he was a senior healthcare advisor to the obama presidential campaign. the number of positions with the national institute of health. doctor robert book is our fourth witness. he is a health economist who advises as a healthcare and economic expert for the american action forum.

he is a director at the health network, llc. he has a wide range of experience. he was senior faculty on the armed forces senior association. welcome again to our witnesses. if you would begin, we will go right down the row. good morning. >> good morning. i am the president and ceo of the alaska state hospital and nursing association. thank you for having me here to testify today. healthcare providers face a variety of burdens, from state, local and other registrations -- other regulations. i will speak on the impact of this on our system. healthcare providers and regulators share the same goals. providers wreck -- providers

recognize the framework that allows them to focus on patients rather than paperwork and use resources for healthcare quality. we appreciate recent work, but given the amount of regulation and the pace of change, must more -- change, more must be done. the direct cost was quantified in a recent report. hospitals and health systems must comply with 629 discrete regulatory requirements across nine domains, spending $39 billion annually on activities related to regulatory compliance. for a facility with 160 beds, this equates to spending over $7.5 million annually on compliance. for skilled nursing facilities, the cost of complying exceeds

$735 million annually, or nearly $100,000 per building. this is at a time when skilled nursing facilities are at less than 1%. we often discuss direct cost, but it is important to recognize opportunity cost as well. the opportunity cost is the next best thing you could have done or the value of the foregone alternative. it highlights the value of scarcity. when a dollar is spent on administrative cost, it is not available for something else. money spent on regulatory compliance cannot be used for hiring doctors and nurses or addressing community needs. there are steps the government could take to address the growing mountain of regulations, while addressing safety. for hospitals we recommend better aligning and applying requirements across agencies and programs. regulators should provide clear, concise guidelines for the implementation of their rules.

conditions of participation for medicare. it should be evidence-based, aligned with other industry standards and flexible. requirements should be streamlined. finally, congress, cms and the inspector general should address efforts to provide the ability to support coordinated, high-value, care. skilled nursing facilities face new mandates to hire staff and establish compliance programs, that due to their sheer volume, are difficult if not impossible to implement. cms should revise the requirements, make them more outcome focused and patient centered. we also recommend the revocation of training if the facility receives a significant penalty. finally, we urge congress to

address the requirement that 5% or a minimum of five facilities receive a survey each year. this unfairly penalizes small facilities and i want to thank the senator for her interest in this issue. rapid improvements are occurring . voluntary partnerships between cms and providers to improve quality, like the partnership for patients and the american healthcare association quality initiative are resulting in measurable improvements. skilled nursing facilities are improving on 20 of 24 outcomes and providers are exceeding national trends in several areas. hospitals released -- hospitals reduced the rate of death from septic shock and just five years. behind those statistics are real people. someone's mother, someone's friend, someone's child, alive today because of this collaborative work.

we must focus our resources on the partnership yielding real results for patients. the issue of administrative burden comes into sharp focus in rural america. it requires scale to implement and rural areas lack scale. the nations hospitals and skilled nursing facilities cannot continue to comply with an ever growing burden of federal regulations. for a large hospital, the opportunity cost may be a program delay, but for a small town this may be more difficult. it may mean a loss of services. i want to thank this community for your commitment to improving the nation's healthcare system and for having me here today. >> thank you. >> members of the committee, i am president and ceo of america's health insurance plan. i appreciate the opportunity to testify on reducing healthcare costs and administrative spending.

every american deserves access to comprehensive, affordable coverage choices, without regard to pre-existing conditions that helps to improve their health and financial security. our members are strongly committed to advancing this goal. our members invest in a wide range of initiatives to protect patients from inappropriate or unnecessary treatments. our testimony focuses on four areas. first, we provide an overview of how consumer dollars are invested. our analysis shows the vast majority of every dollar goes to pay directly for treatment and services. the rest largely fund programs and services that improve health, reduce cost and increase healthcare choices. second, some of the activities carried out by insurance providers, including medical management, coordination and fraud prevention. these work together to improve

the healthcare experience and reduce cost for consumers. third, we offer the example of how administrators are working. finally, we outline our recommendations on steps that can be taken from policymakers to address barriers to simplifying processes and providing more value. health insurance providers have a 360 degree view into how patients use their coverage and care. our members have pioneered many strategies for making healthcare more effective, efficient and affordable. for example, several research studies show wasteful spending. two thirds of physicians report that two thirds of care is unnecessary. healthcare providers use medical management tools to help patients get the right care at the right time in the right setting, with a focus on better, modern care. we work with clinicians to confirm treatments ahead of time and ensure the use of the most cost effective therapies.

prior authorization is one example of an effective tool to ensure better, smarter care. although it is applied to less than 15%, it effectively addresses overuse and misuse of procedures in commercial and public programs. with prior authorization, we analyze whether a treatment is safe for a patient. insurance providers also ensure it is provided in the most appropriate care setting, why a qualified, licensed provider. we are working with many others, including the ama, to improve prior authorization processes. by making prior authorization more fully electronic, we can improve its efficiency. health providers have also invested billions of dollars to monitor and detect fraud. we are a founding member of the healthcare fraud partnership which includes the federal government, state agencies, law enforcement and health plans.

we have saved hundreds of millions of dollars through the detection and prevention of fraud. we are also working with others to simplify operations. for example, through a partnership with the council for affordable quality healthcare, members collaborate with other stakeholders to develop and adopt standard rules for electronic transactions. because of this work, and increasing number of transactions are now electronic. there is more work to be done. the report estimated more than 3 billion manual transactions occur each year between commercial health plans and providers. insurance providers have played a willing -- played a leading role in portals for access to multiple plans for eligibility information. such as co-pays, coinsurance and deductibles. portals also provide information on claim status, reducing time and paperwork.

our industry actively participates in the core quality measures collaborative, to award high-quality evidence- based care. our agency is working to achieve further improvement, including moving away from paper transactions, creating parity and privacy laws for physical and behavioral health, improving transactions and recognizing prod -- recognizing fraud prevention and detection. thank you for the opportunity to testify. >> thank you. doctor keller, welcome. >> thank you for inviting me to testify today. i am a professor of economics at harvard where i have been teaching for 25 years. i am delighted to talk about the role for reducing administrative cases in u.s. healthcare. healthcare administrative expenses are a major drain on

the economy. as much as 30% of the healthcare bill in the u.s., $1 trillion per year, is devoted to administrative expense. this is twice what the united states spends on caring for cardiovascular disease and three times what we spend treating cancer. most of the expense is what is called billing and insurance related services, two thirds of which occur in providers offices. there are several reforms that would reduce administrative costs in the u.s. some of these have been picked up by other witnesses. let me just try to give them. the first, simplifying the complexity with which patients are coded. for example, when a patient visits the emergency department, there are five different codes

they could be put in, depending on the past history of the patient and other conditions. as a result, an enormous amount of manpower is spent searching through the record, so he or she can be put in a higher category for reimbursement. this is wasted time, effort and money that could be directed to other uses. second, something that is also been mentioned, standardizing preauthorization requirements. a great share of the cost of the administrative burden in the united states is documenting prior authorization. for example, if one service is going to be provided, it has to be done in advance and proof that it was done in advance and has the requisite outcome. i have been in hospitals where the procedures for radiology services that they have to comply with is over a foot thick. each insurer will have their own policies and each payer working with that insurer will

have their own policies for authorization. the net effect is an army of coders and medical record people who are employed, keeping up-to-date with that. the third issue is the integration of medical record and billing systems. this is something that was mentioned in the opening comments, which is absolutely right. computers take over for people. in healthcare integration, people take over for computers. you have an electronic medical record system and a billing system that keeps separate information. as a result, you have people involved in one and the other and it is extremely costly. as the chairman says, the requirements with regards to automation and integration have not kept up with where we need to be. that is said -- that is a

serious problem. we could eliminate half or more of the administrative cost burden and reduce medical spending by 8 to 15% if we were to simplify the administrative transactions associated with billing and insurance. the unfortunate circumstances that these changes will not occur on their own. even the big players are not big enough to make these changes occur with not additional help from the biggest player, the federal government. in fact, if you look at other industries, they all have a common theme. the biggest player in the industry has been intimately involved. in the case of retailing, that is selling goods to people. companies like walmart have standardized billing, packaging and coding and all sorts of things, so the transaction, which in healthcare involves several providers and involves

no one in retail. the second example is the federal reserve, which standardized financial transactions in the 1970s and kept that system up-to-date over time. that has saved an enormous expense for banks and other institutions and can only happen with the federal government being involved. what we see in industry after industry is that the big player has to take part or it doesn't happen. therefore, what i recommend, and i will be very explicit, is that the department of health and human services, working with healthcare organizations, develop and implement a plan to reduce the administrative burden in healthcare by 60% in the next five years. i believe such a plan is achievable and attainable. i believe it would have enormous benefits for the economy and i don't believe it will happen without actions by the congress and the administration, so i encourage you to act rapidly.

thank you for having me here and i look forward to any questions you have. >> thank you. following the testimony, i will step out for an appointment. doctor book, welcome. >> thank you for the opportunity to discuss my research on healthcare administrative costs. costs occur at three levels. the health plan level, whether a private sector health plan, inside the health plan, and that the provider level. and also at the patient level. the patients have to schedule appointments and crossmatch them and make sure everything is right. there is a significant amount of research at the health plan level. a smaller amount on the administrative costs at the provider level and as far as i can tell there is no research at the patient level, which will affect us in one way or another. the primary problem that we

have in the discussion is most reports have administrative costs as a percentage of total spending. this is a problem when talking about administrative costs that the plan level. some may claim that medicare costs are 2% or 5% and private insurance are 10% or 20%. it turns out medicare is mostly patients 65 or older or with end-stage renal disease and they need more healthcare than people covered in private plans. so you take the administrative cost, divided by a much larger number, you get a smaller number and make them look efficient. it is not because they are more efficient, but because they have sicker patients, which is nothing to do with their administrative costs. it turns out, the correct way to do this is to look in terms of the administrative cost, per

person. because they don't scale with the dollar value of claims. not even that much with the number of claims. if you look at claims processing and medicare, it is about a quarter of a percent of the entire budget and doing that more efficiently will not affect their cost very much. so, the administrative cost, last time i did the calculations, averaged $509 per person and private costs that senior were $463 per person. they were closer and medicare turned out to be a little bit higher. this occurs when we compare systems in different countries, at the health plan level or the provider level. there was one study that attempted to compare hospital administrative costs. it said that hospital employees in some countries employ large numbers of physicians. that is not how it is done in the united states. physicians are paid separately. then they reported

administrative costs as a percentage of total hospital expenditures. well, if expenditures included payment to physicians, then it would be a lower percentage. countries who did that looked more efficient, but it is being measured differently. we discover nothing about whether administrative costs are higher in one country or another, because we haven't made an appropriate apples to apples comparison. it is also appropriate to collect direct costs. budget documents were not designed for us researchers and it is hard to track down costs. we end up making estimates. i can tell you for sure, if the answer is a percentage, it is wrong. it is simply asking the wrong question. more recently i looked into how the aca affects the exchanges, which is supposed to reduce the

administrative cost and it turns out that the insurance companies did save money. the administrative costs from the year before to the hereafter went from $414 per person, but the total went up $893, because the federal government spent more money setting up the exchanges than they saved in administrative cost for the companies. i would like to address one story that has been going around. i think it was mentioned in an earlier hearing that said that duke university hospital has 900 beds and 1600 billing clerks. that seems like the wrong comparison, because they have a lot of outpatient care, which has nothing to do with hospital beds. we checked on their website and inpatient care represents about 50% of the visits. i talked to the associate vice president and it turns out they do have a staff of 1500, but

they also handle medical records, health information, coding, and all sorts of other functions. when we ask how many people just handle billing for duke hospital, it turned out to be 16 full-time equivalents. not 1500, 16. thank you. i will be happy to answer your questions. >> thank you, all. i appreciate what you have contributed this morning and we will begin with questions. senator young is first up, but he is not here, so, senator isaacson. >> thank you. i will make sure i heard this right. you said you thought we ought to have a go at reducing administrative expenses by 50%

within five years, is that true? >> that is correct. >> you believe that is doable? >> i do. >> what is the largest reduction? >> the three items i gave you would be simplifying the complexity, so you don't have to search through everything with the patient, everything the patient has ever had. second is standardizing requirements, so we don't have to deal with enormously different systems for every insurer and the third is electronically integrating medical records and billing systems, so we don't have to have people take information from one system and put it in another. those three would go a great way. >> the last point -- those are

two of the bigger ones, correct? >> correct. >> is it true they are not interoperable? >> correct. >> doesn't that add to the cost? >> indeed, that is exactly what i was thinking. >> you are making me look good. >> i appreciate you making me look good, too. >> the chairman of the committee has gone through a process of making our software interoperable. with the department of defense, different software systems, everything else. we have just signed one of the largest contracts which covers the dod. we will merge all veterans healthcare. do you think things like that will help reduce the

overall cost? >> i do think so, especially if done in a way where you can view across all systems, so you can see what is needed for each particular patient, when you need it, and avoid the integration hassle. >> georgia tech has developed a system called fire, are you familiar with that? >> i am not. >> it is an acronym for interoperable software between different systems for healthcare, so they can talk to each other. i did y2k with the state of georgia. 20 years later, i end up in the united state -- the united states senate. what i have basically come to learn is all the great things technology brings gets complicated when you have two

different systems operating that have to talk to each other. so, i have come to believe that one of the most important things we can do to reduce the cost of administration and record-keeping and i would think, probably, preauthorization, too, would be as much standardization and interoperability as possible, so wherever a patient comes from , the system is so they don't have to redo things. i think that is one of the major costs. i hope we will be proven right at some point in the future. >> lastly, on preauthorization, is that primarily on surgeries? >> it actually occurs

throughout healthcare. on surgeries, radiology, testing, minor procedures. it happens all over. >> and is it designed to reduce the number of healthcare claims that are filed? >> it is. there is nothing wrong with having different systems and policies. some are more generous. the issue is there are so many that it is difficult to keep up with them. a provider may face thousands of different requirements, depending on which company the patient is insured by end which employer sponsored that. that the patient works for, because they may have customized their own preauthorization requirements. >> one quick question. i had a case a number of years ago where my company, i went to the dermatologist to have a mole removed. it was tested and came back but nine and the insurance would

not pay for it. they would have paid for it if it were malignant. that is a catch 22, it seems to me. does that still go on? >> yes, it does. >> thank you. >> senator murray. >> thank you, thank you to all of our witnesses for being here today. in april, your association commented on the proposal to expand the availability of short-term plans and you wrote that you are concerned that substantially expanding access to short-term, limited duration experience will negatively impact conditions in the individual health insurance department, exacerbating problems with access to affordable coverage. you stated that plans are offered to consumers only after submitting information about

their health status or prior medical conditions. we spent a lot of time focusing on paperwork burdens that providers and insurers deal with in our system. one of the problems was that the trump administration sabotaged our healthcare system and the paperwork burden it will impose on families. can you tell us more about the information patients are often required to submit to purchase short-term health plans? >> sure. i think as a basic starting point it is important to note we have supported access to comprehensive coverage, including coverage for pre- existing conditions. there are some instances where short-term plans are in the market and they will be asking consumers for particular medical information. it will vary, based on who the insurance provider is. the questions could be around pre-existing conditions, use of medical services in the past, other risk factors. that is the type of information that would be asked for within

short-term policies and i think when we are talking about the impact on the individual markets, that is why we expressed some concern about how this would impact the rest of the market. we said they should be short- term, limited in duration and nonrenewable. most important, we emphasized the need for clear disclosures to consumers. we want to make sure there is no confusion as to what policy a consumer is buying. they need to know whether it is comprehensive coverage or a short-term plan. they really emphasized the need for clear communication so people understand what it is they are buying. >> i appreciate that. i hope we can also work to make sure that we don't impose new paperwork for our patients. doctor cutler, i am worried that short-term plans will provide -- will impose a burden

on providers that will in turn go on the patient, in terms of higher healthcare cost. tell us about how the coverage in short-term plans compares to normal coverage and do patients typically have to pay more for their care out-of-pocket if they use short-term coverage? >> typically the answer is, yes. the short-term policies don't cover as many services or as generously, so it adds to this set of policies that providers have to be aware of. many times they will have limitations on medications or particular services. the provider will have to spend resources figuring out where to direct the patient. they need to assess the needs of the patient -- >> so, when hospitals receive less of their patient --

payment from insurers and more out-of-pocket, does that increase or decrease the time they spend on patients? >> an increase. many hospitals, because of the increase in high cost-sharing plans are devoting more resources to collecting money from patients and that will be a big burden for a number of organizations. >> what is the likelihood that patients won't be able to pay? >> it is very high. the typical american family has $600 in its bank account, so when faced with a deductible of $3000 or a service that is not covered entirely, they don't have the resources on hand to pay for it. either they put it on a credit card and it goes into general debt, or the provider institution works out an arrangement with them and spends a lot of money collecting down the road. >> thank you. i am really concerned, if we expand the use of insurance

plans, hospitals and clinics will have to do more bills -- have to do more work to collect bills. hospitals will have more uncompensated care and that increased costs for everyone. that is my concern. i appreciate your response. >> thank you, senator murray. >> doctor cutler, in your testimony you discussed in economic arms race between providers that causes administrative costs to skyrocket as payers try to prevent unnecessary payment. insurers introduce requirements, providers must fulfill before they get paid and in response, providers hire additional personnel to maximize the amount they are reimbursed. it goes on and on and on and

consumers are stuck with the bill. are there actions congress can take to incentivize payers and providers to avoid this? then, question number two, is weatherall -- is whether federal payers are part of this problem? >> thank you, senator. on the first question, there is a good deal that could be done on standardization. i want to go back to the question that was, how would one do it. the complexity of coding is a clear example of this, where an insurer will require additional codes before it will pay an additional amount, and the provider system will hire more people to code those codes. seeing the codes go up, the insurer adds additional requirements, and so on. eliminating many of the adjustments would make sense, because you don't have to get in an arms race over that. second is the preauthorization requirements.

you have a situation where it may be perfectly reasonable for one insurer on his own to have a tough requirement, and they don't recognize the enormous burden placed on the providers and other insurers, by now contributing to the cacophony of different things that a small provider system has to deal with. third, integrating billing systems and medical record systems which is an area where the federal government has a responsibility for this through the program and has not done so in this dimension, which i think has been a lost opportunity so far. i think all of those are areas where the federal government will have to be uniquely involved in this. in terms of federal payers, i think they vary enormously. the medicare program probably involves less administrative costs for providers than the medicaid program does. the reason is that preauthorization requirements

are minimal in the medicare, with the exception of medicare advantage. but the preauthorization is relatively small. by and large it eliminates some of those costs. medicaid is somewhat different. patients turn a lot from one plan to another and one system to another. that is difficult for a lot of providers, because it is not entirely clear who will be insuring the patient when the patient comes for services or even if that patient will be insured at all. it is something where it is havoc on providers, not just on lost revenue, it increased expense on having to monitor patients and collect from them. >> in your response, you referenced the coding and the

severity levels and you discussed it. the severity neutral payment, where providers are paid more with some exceptions for more severe cases. what agreements between providers and for agreeing to severity neutral compensation for payers, would it require new regulation or legislation to your knowledge? >> one could have private agreements that would not. in order to be really effective, you would have to do it for the vast part of the healthcare system, because it is difficult to have different payers with different requirements. the greatest gains would come from standardization, which necessarily involves the federal government. the reason many providers and insurers have not gone there is because the federal government

is acting a different way and it makes no sense to do something different. it has to be in concert, with medicare, but also medicaid, in order to get maximum effectiveness. >> that is a good point. i think as we think about standardization, it is important to note that there are a number of private efforts that are within the congressional purview. so, what is happening with the counsel of affordable healthcare, they created a committee with over 100 organizations looking at how you can standardize these processes and transactions to get a more simplified way of operating, so you can do these in real time. right at the point of treating an individual patient or the point of prescribing. there are efforts that are happening, but that is not to say that moore can't be done.

>> thank you. >> thank you madam chair and ranking member marie. thank you to all the witnesses for being here today. we are talking a lot this morning about the administrative burdens and healthcare systems. i think it is important that we remember the most significant part of this whole discussion is patients and their families. i am the mother of a son with complex medical needs. at various times, he is a wonderful young man who happens to have cerebral policy and the -- have cerebral palsy and the complications that can go with that. he also doesn't communicate well with the outside world, though he is constantly understanding everything. we have been very fortunate, because he has had incredible providers and caregivers, but i have experienced firsthand what

it is like to jump through administrative hoops. being stuck in the middle between providers and insurers or sometimes dealing with an insurance and company employee who doesn't have the expertise to understand the record he is looking at. i have also been there when the insurance all of a sudden decides to switch him from one medication he has been on for years to another medication. at one time he had 10 doctors and 20 medications. i experience from others who -- i hear from others who experience these frustrations, too. it is hard to spend all day on the phone, particularly when you are juggling a job, caring for kids and all the activities that families have.