Reduction in erroneous medical claims payments saves $8 billion

The nation's largest health insurers halved the number of medical claims paid incorrectly last year, according to the National Health Insurer Report Card compiled by the American Medical Association (AMA). The latest figures from AMA reveal that 9.5 percent of claims were paid incorrectly in 2011.

The result of the drop from the 19.3 error rate reported in 2011 is a saving of $8 billion due to reduction of administrative work needed to reconcile errors. While the past year has seen a dramatic increase in medical claims accuracy, the AMA pointed out that the current rate of errors still represents about one in every 10 claims paid in the wrong amount. Elimination of those errors could save the industry an additional $7 billion.

“We are encouraged by [the insurance companies’] response to our concerns regarding errors, inefficiency and waste that take a heavy toll on patients and physicians,” said Robert M. Wah, MD, board chair of AMA, in a press release. “Paying medical claims accurately the first time is good business practice for insurance companies that saves precious healthcare dollars and frees physicians from needless administrative tasks that take time away from patient care.”

Among the seven large health insurers, UnitedHealthcare finished with the highest claims accuracy for the second straight year, processing 98.3 percent of claims without error. Anthem Blue Cross and Blue Shield, which last year had an accuracy rating of only 61 percent, saw the greatest improvement over the past year, finishing this year with a rating of 88.6 percent.

But while claims accuracy was up dramatically, so too was the number of medical claims requiring prior authorization. Medical services requiring prior authorization rose to 4.7 percent of all claims, according to the AMA report, a 23 percent increase over the prior year and activity that cost the industry an additional $728 million in administrative expenses.

“The costly administrative burdens of the prior authorization process can complicate medical decisions and delay or interrupt patient care,” added Wah. “The AMA calls for replacing the largely manual process with an automated decision support system that will enhance patient care and reduce paperwork costs.”

Other significant findings of this year’s report:

  • In the period 2008 to 2012, private insurers have improved response times to medical claims by 17 percent. Among private health insurers, Health Care Service Corporation and Humana had the fastest median response time of six days. Aetna was the slowest with a median response time of 14 days.
  • In the same five-year period, health insurers have increased the transparency of rules used to edit medical claims by 33 percent.

Medical claim denials are on the rise, reversing a downward trend that occurred between 2008 and 2011. The overall denial rate for private health insurers went from 2.10 percent in 2011 to 3.48 percent in 2012, an increase of nearly 69 percent. Every private health insurer except Humana increased denials this year.

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