OPINION:
For years, Americans have debated how to expand health care coverage or adjust insurance subsidies. Yet the fastest, least controversial way to reduce national health care costs has received hardly any attention: modernizing the payment infrastructure that sits between insurers and medical providers.
The United States spends more than $5 trillion a year on health care, but a significant portion of that cost is absorbed not by medical care itself but by the mechanics of billing, claims adjudication and payment. Administrative overhead accounts for an estimated 15% of total health care spending, roughly $750 billion a year, much of it tied to the slow, fragmented, duplicative payment systems used by insurers and providers.
The core payment architecture has barely changed in decades. Claims can take 45, 60, even 90 days to be paid, and 35% of payments to providers (hospitals and doctors) still arrive via paper checks. Providers bear the expense of disparate technology connections with insurers and a thicket of proprietary rules.
Nothing is inevitable about this inefficiency. Other industries confronted similar problems and solved them.
In the late 1960s and early 1970s, Wall Street was overwhelmed by paperwork (i.e., stacks of physical certificates and paper trade confirmations). Back-office staff could not reconcile trades fast enough. Errors multiplied, settlement delays increased risk and payment delays caused firms to fail. The New York Stock Exchange closed on Wednesdays to catch up with the paperwork (with nearly 15 million shares daily versus today, when equity markets trade 2.3 billion shares a day).
The solution was the creation of a national clearing and settlement utility, which is now the Depository Trust & Clearing Corp. By standardizing transaction formats, automating matching, eliminating paper certificates, unifying technology requirements and centralizing payment, the Depository Trust & Clearing Corp. transformed the industry. It reduced operational risk, lowered costs and accelerated settlement cycles, thereby giving U.S. markets the lowest cost post-trade infrastructure in the world.
The health care industry is at the stage where financial markets were before the Depository Trust & Clearing Corp. Thousands of participants — insurers, hospitals, physician practices, clearinghouses, billing firms and software vendors — operate on incompatible systems with no universal standard for claims, eligibility verification or payment. The result is a structurally inefficient system.
What the country needs is a health care clearing corporation or equivalent of a clearing and settlement utility. It would not replace private insurance or reshape clinical care. Instead, it would serve as a neutral, industry-governed infrastructure platform that standardizes claims, validates eligibility, applies coverage rules and settles payments electronically at high speed.
A well-designed health care clearing corporation would function much like the Depository Trust & Clearing Corp. Insurers and health care providers would submit claims through a single standardized format and reduce the need to support multiple technology connections. Eligibility would be verified quickly. Coverage rules would be applied consistently. Insurers would receive one unified data feed instead of dozens of inconsistent formats. Payments could be executed electronically within days, not months.
The goal is not to change who pays for health care but to eliminate the friction and redundancy in how payments occur.
Benefits are substantial:
Lower administrative costs: When every insurer maintains its own proprietary interface, rules set and coding requirements, providers must support and maintain dozens of costly workflows. A centralized utility eliminates that duplication. Even a modest reduction in administrative expense ($750 billion) would produce savings larger than many recent federal health care initiatives.
Greater technology resilience: The 2024 cyberattack on Change Healthcare (when more than 190 million people’s data was exposed) underscored how a central utility with strong cybersecurity and redundant systems would reduce systemic risk and ensure continuity of operations.
More transparency: A unified data platform that requires collaboration among insurers, providers, and policymakers ensures better visibility into utilization, bottlenecks and inefficiencies.
Congress could authorize the creation of a health care clearing corporation while leaving governance to industry participants/experts who design and operate the platform. It would not be a government-run system; it could more closely resemble the Depository Trust & Clearing Corp.’s industry-led model.
Technology is not the obstacle. The tools that would power a health care clearing corporation — cloud infrastructure, real-time payment rails, artificial intelligence and standardized data interfaces — already exist. What is missing is unified industry coordination.
A strong bipartisan case can be made for a health care clearing corporation. Modernizing the payment infrastructure does not require ideological alignment. Every stakeholder benefits from faster payments and lower overhead.
A health care clearing corporation wouldn’t solve every challenge in American health care, but it would address the one problem that affects every insurer, hospital, physician, employer and patient: the needless complexity and cost embedded in the payment system. Until we tackle administrative waste, it will continue to drain resources that could be better spent on patient care, innovation and affordability.
The blueprint is clear. The need is urgent. If the United States wants a more efficient and affordable health care system, it must start by modernizing the infrastructure beneath it. We don’t have to rebuild the house; just modernize the plumbing.
• Stuart Z. Goldstein has been managing director of corporate communications at the Depository Trust & Clearing Corp. for 20 years.
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