The cost of health care administration: What’s the problem? Where to start?

How could health care leaders resolve the administrative burdens that are crushing in the U.S. health care system? There are two places to start. Health insurance administration is an analog process that needs to be digitized, and no one is in charge of the transactions. Kevin Schulman, MD, MBA, an internal medicine physician and professor of medicine at Stanford University, explains more.

Medical Economics: For those not familiar with the term, can you explain what is “precedents thinking?”

Kevin Schulman, MD, MBA: We’re pretty comfortable, we understand why administrative costs are so high, what the problem is. At its core, we took an analog business process and digitized it. We never created a digital process. So when you pull out your insurance card, you're paying 30% transaction costs. When you pull out your credit card, you're paying 2% or 3%. As an exercise in class, I have everyone pull out their insurance card and take a look at it and see what's wrong. And if you do that exercise, you will see that there is no barcode, there's no chip, it's a totally analog process. You go to the doc, they scan it, they type it. You know, it's great 1980s technology, but this is 2025. So, we've characterized the problem. The other part of the problem that we've characterized is, no one's in charge of these transactions. So every health plan has their own schema that makes sense for them, but there are multiple different health plans in the market. Nobody is responsible for building a single set of rails or pipes to make transactions efficient for health plans and providers across the market and to reduce the cost of health care for all of us.