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Poor Healthcare Literacy Leads to $4.8B in Administrative Costs

Low rates of healthcare consumer literacy, driven by the healthcare system’s complex navigation mechanisms, create billions in administrative costs for payers.

Poor healthcare literacy drives up administrative costs for payers.

Source: Thinkstock

By Thomas Beaton

- Widespread rates of poor consumer literacy within the healthcare industry creates administrative burdens for payers and contributes to an additional $4.8 billion in health plan costs, according to a new Accenture report.

Fifty-two percent of healthcare consumers in the United States do not understand how to properly navigate the healthcare system and struggle when learning about new health plan types, premium expenses, and available in-network providers. In addition, 16 percent of respondents claim to have a thorough understanding of the healthcare system while 33 percent have no experience in making healthcare decisions.

The rampant confusion among healthcare consumers leads to significant customer service and other administrative costs for insurers, the report found.

Payers and employers sponsoring health insurance spend $26 extra on administrative fees for every customer with low healthcare literacy low, which eclipses $4 billion annually. Consumers with high healthcare literacy contribute to $1.4 billion in administrative costs and cost roughly a quarter less than those on the other end of the spectrum.

Consumers with a low level of healthcare literacy are 13 percent more likely to contact customer service representatives, are three times more likely to use customer service supports during a three-month period and seven times more likely to use customer service multiple times a week.

Twenty-six percent of healthcare consumers have a low understanding of the system and the highest healthcare need — that is, they face sizeable medical costs for serious conditions such as cancer, congestive heart failure, or renal failure.

Payers can help to address low rates of consumer literacy through key strategic initiatives, authors concluded.

A health plan can start to eliminate gaps in literacy by investing in communication channels based on a beneficiary's preferred outlet — digital or otherwise. Payers can also encourage providers to educate patients about health insurance options and how to select appropriate care services. Health plans also have the ability to engage community navigators and specialists to help beneficiaries navigate the financial, logistical, and other non-clinical challenges of healthcare utilization.

Health plan customer service is a critical driver of member satisfaction which at its core addresses a beneficiary’s concerns about health plan benefits, cost-sharing requirements, and administrative responsibilities like enrollment protocols. A helpful customer service program not only educates beneficiaries about the healthcare system but also encourages brand advocacy from health plan members. 

“Consumers are expected to understand and navigate the complex layers of a healthcare system that was not designed with them in mind,” said Jean-Pierre Stephan, managing director of health engagement at Accenture. “Education alone won’t solve this systemic problem, because it isn’t that Americans are failing in healthcare literacy, rather it is the complexity of the system that is failing them.”

“The only way to eliminate this systemic issue is advancement,” Stephan said. “Rather than forcing consumers to battle the complexities of the system, the healthcare system must design user experiences to align seamlessly with the needs, behaviors, and preferences of the people it serves.”


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