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Low consumer literacy of healthcare industry linked to almost $5 billion in costs, report finds

Confusion over navigating the complex healthcare system translates into a significant customer-service cost burden for insurers.

Jeff Lagasse, Associate Editor

Half of U.S. consumers are unable to navigate the complexity of the healthcare system on their own, according to new report by Accenture, and this low level of health system "literacy" costs the industry an estimated $4.8 billion annually in administrative expenses alone.

"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 healthcare system is so complex, the report found, that 52 percent of consumers don't understand how to navigate it appropriately. They struggle to make informed decisions about everything from the health plan types they choose and the premiums they pay to the doctors they see and the procedures they have done.

Overall, just one in six consumers, about 16 percent, are considered to be experts in navigating the system. One-third have no experience or proficiency with it whatsoever.

Confusion translates into a significant customer-service cost burden for insurers. Compared with those who have a high level of literacy with the healthcare system, consumers with a low level of system proficiency are 13 percent more likely to contact a customer service representative, three times more likely to use customer service one to three times a month, and seven times more likely to use customer service one to three times a week.

On top of that, 26 percent of consumers have both a low understanding of the system and the highest healthcare need, facing sizeable medical costs and serious conditions such as cancer, congestive heart failure or renal failure, which require additional interactions.

Among the report's other findings are that health insurers and employers spend about $26 more on administration fees for every consumer with low healthcare system literacy -- which translates to $4.82 billion annually in administrative costs, compared with $1.4 billion for those with high system literacy.

Pointedly, the report mentions that health system literacy is not about education level. Roughly half, 48 percent, of those who have low literacy are college-educated, and 97 percent have at least a high school diploma.

If all consumers had a high understanding of how to navigate the healthcare system, insurers could save $3.41 billion a year in administrative costs. These savings would be even greater if the analysis accounted for the impact of low healthcare system literacy on medical costs, the report found.

Twitter: @JELagasse
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