The success of healthcare reform hinges largely on reducing healthcare costs and improving access to healthcare for millions of uninsured Americans. Payers hoping to sell their insurance products through health insurance exchanges are likely to witness severe competition from other exchange-hopeful payers and those operating in the outside-exchange markets. Payers will be required to moderate their premium rates and keep a close watch on their administrative costs to successfully balance their product pricing while ensuring profitable enrollments through an exchange.

Most U.S. payers retain large volumes of patients’ data that is judiciously analyzed to keep up to speed on important trends in consumer behavior. Such information, when gathered and merged with data from other healthcare stakeholders such as hospitals and physician coalitions, can be used to reduce administrative complexities and improve process efficiencies to ultimately improve the quality of healthcare delivery. In the same vein, devising strategies to reduce duplication in administrative processes such as health benefit maintenance through a payer’s local and exchange systems, can aid in controlling excessive waste in healthcare costs.

Administrative simplification can be achieved through coordinated implementation of process automation and standardization across the industry, even in the face of competing priorities of different healthcare participants. Innovative measures, such as setting up a centralized body for monitoring and managing process changes in public and private insurance markets, can be instrumental in reducing process complexities.

A few months back, the Center for American Progress (CAP) convened prominent health policy experts to deliberate on innovative and sustainable measures for tackling high healthcare costs. Some of the recommendations – negotiating payment rates in line with global spending targets among a state’s payers and providers; encouraging nationwide competitive bidding for all healthcare commodities; introducing tiered plans in exchanges; establishing secure channels among payers and providers to enable electronic exchange of eligibility, claims, or administrative data; mandating full transparency in healthcare rates and transactions – if introduced in part or together as a package, can help control increases in healthcare costs.

In a recent November 2012 CAP report, The Senior Protection Plan, the CAP team recommended that proposals such as turning Medicare into a voucher-based program, increasing the Medicare eligibility age to 67, etc., does more harm than good in supporting a sustainable healthcare business model. Instead, progressive measures such as competitive bidding, enhanced transparency, reduced drug costs, etc., not only facilitate federal savings over $385 billion over the next 10 years, but do so without harming senior citizens’ Medicare benefits in any way.

Administrative costs account for 14 percent – an estimated $361 billion dollars annually – of all annual healthcare expenditures in the U.S., approximately half of which can be prevented with careful planning and implementation. Through integration, process automation and standardization, and system-wide coordination among private and public insurance players, the healthcare industry can generate huge savings and returns. The new exchange markets provide a ready and lucrative platform to payers for testing the potential of a well-organized healthcare reformation that is bolstered by strong technical integration and efficient collaboration among different healthcare intermediaries.

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