The cost of health care administration: Centralized or standardized processes?

If Americans don’t want centralized health care, don’t give it to them. There are benefits to the current system, and the U.S. government is not set up to handle health care as a $5 trillion economic sector anyway. But standardized processes could help the existing system tremendously, said Kevin Schulman, MD, MBA, is an internal medicine physician and professor of medicine at Stanford University.

Medical Economics:The paper also notes an important distinction between centralization and standardization when creating processes or protocols to solve problems in business. Can you talk about that distinction?

Kevin Schulman, MD, MBA: I think it goes back to 2020, (Sen.) Elizabeth Warren (D-Massachusetts) put together a proposal for how she would finance and administer the Medicare for All program. It was this two-page spread in The New York Times, if anyone took a look at it, and it was the scariest document I ever saw. The United States government's not set up to manage a $5 trillion health care economy, frankly. I got a lot of pushback at the time, like, Bernie's (Sen. Bernie Sanders (I-Vermont)) saying, well, he's going to reduce administrative costs. But Medicare isn't the most facile of payers. The Medicare program passed in 1965, Medicare didn't have a screening benefit till the 1990s, so it didn't pay for screening mammography, screening colonoscopy, screening PSA exams. Medicare passed in 1965 and didn't have an oral drug benefit until 2006. So if you want a health plan where it takes 40 years to add critical benefits like prevention or oral drugs, in a world that's changing with AI (artificial intelligence) digital services, think about a single-payer system. I think what we want, you know, we want our cake and eat it too. We want more efficient transactions and more efficient transaction processes. We don't necessarily want one health care czar in charge of health plans and what health care looks like. And we have lots of diverse opinions about what that could be, depending on which political party you're in, or economic philosophy. We could keep the current structure of a mixed public-private system that has fostered huge amounts of innovation in the U.S. health care market, but we don't have to pay these administrative costs to achieve that.