Efforts to reduce administrative expenses can help reduce healthcare costs. This paper by Milliman principal Andrew Naugle quantifies the industry-wide administrative expense reduction opportunity. In addition, the paper identifies tactics for transitioning to a best-practice administrative expense level. For the purposes of this analysis, administrative expense are defined as all expenses incurred by payers for common administrative functions such as claim processing, customer service, underwriting, medical management, and sales and marketing, as well corporate overhead and external broker commissions.

This paper was first published by the Institute of Medicine in the book The Healthcare Imperative: Lowering Costs and Improving Outcomes, which is available as a free download.