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After illness, a plague of paper Patients struggle with complex forms and delays in fight to get claims paid


Al Raeke got through his heart surgery in 1990 just fine. It' the paperwork that's killing him.

Three years after his operation at Johns Hopkins Hospital, Mr. Raeke, 66, sits hunched over the kitchen table of his house in Edgemere, despondently shuffling the stack of papers.

After hundreds of hours perusing the bills and forms, making phone calls and writing letters, he's still not sure what services he got, what his insurance should have covered, what he should pay and what might happen if he doesn't. The paperwork is a source of constant worry, a monster that seems to have moved permanently into the house with Mr. Raeke and his wife, Peggy, 63.

"All the terms and conditions, you need to be a doctor and a lawyer to understand," says Mr. Raeke, a retired plumber and printer. "Something here is all screwed up."

You've heard of the plight of the uninsured. Call this the plight of the insured. Ask an American about his experience coping with medical bills and insurance forms, and chances are good you'll hear a long, tangled story.

Over at the Edgemere Senior Center, where Mr. Raeke helps out with ceramics and shuffleboard, one woman tried unsuccessfully for two years to persuade Blue Cross and Blue Shield that she is not dead.

"The date of this service," say the notices, "was reported to be after the date of death."

Joan J. Melvin, a nurse in Chestertown, has struggled for more than a year with an anesthesia bill from back surgery at St. Agnes Hospital. The anesthesiologist's office has repeatedly mixed up code numbers, switched Ms. Melvin's first name and maiden name and failed to straighten out the errors even after the Maryland attorney general's office intervened.

"I do not wish to participate in this game any longer," says Ms. Melvin, 37. "It's gotten to the point where I feel like they should pay me for trying to resolve it."

Such bureaucratic harassment of recovering patients and bereaved families does not come cheap. More than 20 percent of all U.S. health spending goes toward administration, and perhaps half of that is spent writing up elaborate bills and submitting and resubmitting them to patients and to the nation's approximately 1,500 insurance plans.

"No other country has patients filling out forms or trying to get money back," says Donald W. Light, a sociologist studying insurance ethics at Princeton University. "The question the insurance industry is raising for more and more Americans is: What does it add? If its value is to find clever ways not to insure those who most need care and to delay and deny payment of claims, then it's just doing a disservice."

The insurance industry's little family secret is that complexity pays, by increasing the opportunities for errors on forms that can cause claims to bounce. The longer the money sits in insurance-company accounts earning interest, the better.

"We'd search for every legitimate way to not pay a claim," says John K. Lohrman of York, Pa., who formerly processed health insurance claims for self-insured companies and since 1984 has a business helping patients file their claims. "Virtually 30 percent of the paperwork we could reject on a daily basis because something was missing."

Major role for insurers

In Canada, hospitals have almost no billing department, because they are paid a lump sum each year by the provincial government to provide care to all comers. Doctors bill the national health plan on a standardized form. As in almost every other developed country, patients rarely even see a bill.

"In Canada, families commemorate the dead with flowers and contemplation," says Dr. Steffie Woolhandler, a Harvard Medical School internist who has compared the U.S. and Canadian systems. "Here the family spends the next three months trying to sort out the paperwork."

As a result of this simple, single-payer system, Canadian health administration costs amount to only about 10 percent of health spending. The General Accounting Office estimated in 1991 that if the United States were to move to such a system, the savings on bureaucracy would be enough to pay the health costs of the nation's 35 million or so uninsured citizens.

U.S. health insurance companies, which presumably would go out of business under a Canadian-style system, naturally object to the idea. They assert that they save more by preventing unnecessary treatment than they spend on paperwork.

Some health administrators say the savings from a single-payer plan can be overestimated. At University of Maryland Medical Center, only about 5 percent of the $229 million annual budget goes for paperwork-related functions, says Robert A. Chrencik, senior vice president for finance. But that includes such offices as admitting and medical records, which are indispensable. He figures a single-payer system would cut his hospital's costs by only $4 million, about 2 percent of costs.

To counter advocates of a Canadian-style system, the industry plays on traditional U.S. fears of costly government bureaucracies.

"You have to question the assumption that the government can do it better," says Richard Coorsh, a spokesman for the Health Insurance Association of America.

That argument appears to have won over the Clinton administration, which seems likely to propose reforms that preserve a major role for insurance companies. But administration officials have promised to streamline the claims system and simplify the paperwork, perhaps by requiring more use of standardized forms, more electronic claims processing and more use of plans in the health-maintenance-organization style, which can eliminate bills to the


Even the insurance companies agree change is necessary.

"I think everybody has a paperwork horror story," Mr. Coorsh says. "The industry is committed to reform."

Shoe box of records

Al Raeke's horror story began not with the heart attack he suffered while bowling with his grandchildren, nor with the catheterization and bypass surgery that restored him to health.

His troubles began when his insurance company, Group Insurance Services Inc., delayed payment of his claims in a dispute with his employer, his brother's plumbing firm.

Hopkins Hospital and several physicians' groups began billing Mr. Raeke directly. He ignored the bills in the expectation that his insurance would pay. But the insurer began to pay only after more than a year, after a lawyer for the plumbing contractor intervened.

By that time, many of the bills had been turned over to two collection agencies. Collectors began telephoning Mr. and Mrs. Raeke every few days, often in the evening, threatening legal action and even hinting they could lose their house. More than a year ago, still not sure how much he owed to whom, he nevertheless began making regular, monthly payments of $10 and $25 on each of six bills.

A shoe box now contains the records. There are the baffling medical bills themselves, like the one from "JHU-Otolaryngology" that lists such items as "SPONT NYSTAG TST/W/REC" ($55).

There are sparse statements from the insurance company. One shows a payment of just $160 out of $550 in charges from one hospital department. Of the rest, it notes simply: "No medical necessity."

Finally, there are the only-too-clear dunning letters from the collection agencies. The latest, dated April 3, is headed "DEMAND FOR PAYMENT" in ominous red letters: "We regret to inform you that the JHU Department of Anesthesiology has authorized a lawsuit against you." Only the prompt payment of $13,193.74 can prevent trouble, it says.

That would be about eight months' worth of the Raekes' combined Social Security checks. But the fact is, he knows he doesn't owe the money. He has a copy of a check written by the insurer to Hopkins for more than $12,000 of these charges -- in November 1991.

Mr. Raeke has been so shaken up by the experience that he refused to shake hands with a neurologist who introduced himself during a hospital visit last year. He feared the handshake would turn into a consultation, producing another bill that his insurer might not pay.

"I was thinking of stapling it all together," says Mrs. Raeke, "and sending it to Hillary Clinton."

Burden on doctors

Once upon a time, a doctor treated a patient, and the patient paid the doctor if he could. The transaction was not much more complex than the purchase of a quart of milk. At hospitals, almost all services were "bundled" into the daily rates.

Since World War II, as doctors' and hospitals' ability to cure has expanded and health costs have risen, health insurance became a necessity. Then the competitive insurance business produced a greater and greater variety of plans, each with its own rules and forms.

Meanwhile, hospitals came under pressure from payers to "unbundle" their charges. A patient who once got a single, comprehensive hospital bill began to receive a dozen bills from various hospital departments and physicians' groups.

Every step along the way created more paperwork and more jobs keeping track of it. If patients didn't like it, neither did doctors.

"The paperwork I have now is about 300 times greater than when I started in 1958," says Dr. Joshua R. Mitchell III, 63, a family practitioner in West Baltimore. "We need code numbers for this, notes for that, three Xerox copies of everything. It's gotten to be ridiculous."

In his early years of practice, "I could almost run the office by myself," Dr. Mitchell says. Now he has a staff of five people, including two part-timers and one full-time employee just to type reports, submit bills and negotiate with insurance companies and HMOs.

To physicians not used to having their judgment questioned, cost-control provisions designed to eliminate unnecessary care are particularly galling. Dr. Mitchell says he spends hours he'd like to devote to patient care on the phone with insurers, explaining himself.

"Some high school graduate [at an insurance company] will look at a list of symptoms, and if what the patient has doesn't fit exactly with what's in their cookbook, you have to justify it," he says.

Between 1982 and 1991, the personnel payroll for the average self-employed physician doubled from $30,100 to $61,300 a year, outstripping the growth in doctor's net income, according to the American Medical Association. Other office expenses more than doubled, from $17,800 to $39,200. Even those numbers understate the paperwork burden, because many doctors hire outside contractors to handle their billing.

In the past few years, patients, too, have begun to hire others to help with insurance forms, creating a new cottage industry. The 2-year-old National Association of Claims Assistance Professionals has more than 600 members and estimates that 4,000 to 7,000 firms are paid to help Americans with medical paperwork.

"The typical thing in this industry is someone who walks in with a shopping bag full of bills and forms," says Aaron Friedmann, a Baltimore pharmacist who runs his one-man business, Medi-Claim, from his home.

At Baltimore County senior centers, volunteers help elderly clients with their bills for free. Ironically, says Robert Adams, who oversees the Senior Health Insurance Counseling and Advocacy program, one of the biggest problems is patients who insist on paying their medical bills immediately -- and get ahead of their insurance plan.

"The seniors we're serving are of a generation that likes to pay bills on time. That can actually foul up the process," he says.

Administrator is stumped

Terry S. Langbaum, assistant administrator of the Johns Hopkins Children's Center, has worked at the hospital for 18 years. She knows the difference between PPOs and IPAs and where to check the DRG number for chicken pox or the CPT code for a finger splint. She has helped patients awaken from countless billing nightmares.

But after her father died in January at Washington Hospital Center, she nonetheless learned a great deal about the billing system.

Frank Solomon, 74, was admitted to the hospital for heart catheterization at 4 p.m. on a Wednesday. He went to the operating room at 4 p.m. on Thursday, suffered cardiac arrest and died at 10 p.m. despite doctors' intensive efforts to save him.

The hospital bill, listing 250 items on eight pages, including 17-cent aspirins and a $3,190 balloon catheter, came to $31,562.55. The doctors' bills are still coming in but are headed for about $10,000.

Medicare paid the hospital bill swiftly, covering all but $10. But even as a veteran hospital administrator, Ms. Langbaum says, "I have no way of knowing whether what's on this bill was received, let alone whether it was appropriate."

Tracking physicians' bills, sorting out what Medicare has paid and what Mr. Solomon's supplemental insurance policy might cover, has become a part-time job for Ms. Langbaum. Her mother, Leah Solomon, says, "It would be pretty darn impossible to do it without her."

Ms. Langbaum says she knows she is more efficient in straightening out her father's bills than the average person, since she speaks the lingo and knows whom to call.

But she is still shocked by the complexity.

"I have a master's degree and I work with these things every day, and I can't understand the bills," she says. "I've seen the system from both ends, and I don't like either one."

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