ABSTRACT
This chapter discusses some ways of defining or classifying administrative costs, both of insurers and of other participants in the system, and the fragmentary estimates of how large these costs are. Administrative costs of the health insurance system include spending by public and private health insurers other than actual payments to providers and costs incurred by other system participants, including providers, employers, and consumers, in dealing with insurers. The National Health Expenditures (NHE) has a category denoted as 'administrative costs and net costs of private insurance'. In an influential article, Kenneth Thorpe (1992) suggested that administrative costs could be classified in terms of four functions- transaction related, benefits management, selling and marketing, and regulatory and compliance. In 2001, the Administrative Simplification Compliance Act required all Medicare providers and suppliers to submit Medicare claims electronically and in compliance with Health Insurance Portability and Accountability Act (HIPAA) standards by October 2003.
