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Comment and Controversy

The burden of administrative costs

January 2004 · Vol. 16, No. 1
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To the Editor:

I read with interest Dr. Robert L. Barbieri’s October 2003 editorial, “Exploding health-care costs threaten other vital needs.” But I wonder why he didn’t list as one of the causes the increased administrative costs of the health-care insurance industry. I’ve been told insurance companies have added at least 20% to the health-care dollar to “manage” managed care, thereby increasing insurance premiums and reducing payments to physicians.

Lowering the costs of medications and ambulatory surgeries might be an excellent remedy—but reducing the increase in insurance premiums seems easier and faster.



I appreciate Dr. Freidel’s insight—my editorial was incomplete for omitting this important point. I focused on the components of direct patient-care costs that are rising most rapidly. If the costs of pharmaceuticals, ambulatory surgical procedures, and imaging procedures increase at an annual rate of 20%, these services could soon dwarf all other health-care costs. In this scenario, the complete elimination of administrative costs would not avoid a “day of reckoning,” in which the overall health-care budget would need to be examined prospectively.

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