Death, Taxes — and Paperwork

Today, in case you missed is, is the deadline for filing your 2020 federal taxes (it was postponed from its usual April 15 date due to “the unusual circumstances related to the pandemic”). Nothing, Benjamin Franklin famously said, is certain but death and taxes, but if you live in the United States, you might add the inevitability of paperwork involved with both (and with healthcare in general).

The question is, does it have to be as bad as it is?

A Washington Post op-ed by Helaine Olen argues that tax filing could, and should, be much simpler. A March article in The Conversation by Beverly Moran, a tax expert at Vanderbilt, agrees. Both make the point that, for most of us, the IRS could do the work for us.

Ms. Olen asserts:

The thing is, filing taxes just doesn’t have to be this hard. In 36 countries, the nation’s tax agency sends eligible residents a pre-filled return, and asks them to sign if they agree with the amount that’s indicated is owed or should be credited to them. Japan does this. So do Sweden, the Netherlands, Spain and others.

Professor Moran has slightly different numbers, but makes the same point. She adds that our tax system is 10 times more expensive than in other major economies. This should not be a surprise; collectively, we spend close to $200b annually on IRS paperwork, taking some 6 billion hours of our time along the way.

You’d think that all this time and money spent on tax filing would at least give us an efficient tax system, but the opposite is true. The last time the IRS took a look, for tax years 2011–2013, the “tax gap” — the estimate between taxes owed and taxes paid — was $441b annually, some 16% of tax liability. IRS Commissioner Charles Rettig told Congress last month that the number might actually be over $1 trillion annually now, due to new kinds of wealth creation and more sophisticated tax avoidance.

It’s kind of crazy, because, as both note, it doesn’t have to be this way. Professor Moran points out: “Furthermore, 95% of American taxpayers receive more than 30 types of information returns that let the government know their exact income. These information returns give the government everything it needs in order to fill out most taxpayers’ returns.”

Let the IRS do the work.

Congress has been well aware of both the problem and the easy solution for decades, but, both authors agree, the tax preparation industry has better lobbyists than we do. Ms. Olen says: “Much as the medical industrial complex spends huge sums to stymie effective health-care reform, the tax-preparation industry showers largesse on Capitol Hill.” Professor Moran is equally blunt: “I see America’s costly and time-consuming tax reporting system as a consequence of its relationship with the commercial tax preparation industry, which lobbies Congress to maintain the status quo.”

We could, of course, just have a much simpler tax system, with fewer deductions and special provisions (a.k.a, “loopholes”), but, well, getting those enacted are how lobbyists earn their money.

But if there is anything even more confusing and more frustrating than taxes, it just might be healthcare, such as with billing. We’ve all got our stories about not knowing the cost of health care services before we get them, getting bills from healthcare organizations that we don’t understand and that can’t easily reconcile with our health insurance explanations of benefits for those same services.

The Center for American Progress estimates that healthcare “billing and insurance-related (BIR) costs” amount to some $486b annually, at least half of which they deem unnecessary. We’ve just got too many health plans, each negotiating different payment rates with health care organizations and clinicians, almost all of whom have byzantine charge structures that vary wildly based on who is paying.

As Bird Blitch (who, not coincidentally, runs Patienco, “a next-generation patient payment technology company”) writes in Forbes, these “are leading sources of frustration and anxiety for patients, whether they are managing a chronic illness or caring for routine medical needs. This frustrating experience translates to dissatisfied patients and unpaid medical bills.” Mr. Birch advocates that we “centralize financial information for patients” — presumably using Patientco — to achieve a “personalized billing and payment experience.”

Similarly, Cedar, a start-up that has focused on assisting with patient billing for health care organizations, announced it would acquire OODA Health, which has focused on payers, in order to “revolutionize the consumer financial experience in healthcare.” Florian Otto, Cedar CEO and co-founder, said: “we believe that by bringing our companies together, we can identify new opportunities to help consumers — as well as payers and providers — navigate an increasingly complicated healthcare system, leading to better outcomes for all parties involved.”

Well, good luck to both of them. They’ll need it.

But, of course, billing is not the only excessive “paperwork” in healthcare. We’ve all had to fill out countless versions of our health history; recapitulate our prescription drug list; repeat our name, address, D.O.B., telephone number(s), and emergency contacts; recopy our various ID cards; reattach any living wills or health power of attorney. It’s as though we’ve always starting de novo whenever we engage the healthcare system.

EHRs help, but don’t solve, the problem. They still don’t communicate well with other EHR platforms, nor do they stop us from often having to repeat information over and over even within the same system. Similarly electronic claim submission has greatly reduced the amount of actual paperwork involved in filing claims — for patients, clinicians, and payers — but none seems any happier about the process.

Companies like Patienco and Cedar/OODA Health are trying to be helpful, but they’re putting a band-aid on a very dysfunctional system. It’s more like using TurboTax than having the IRS do your tax filing; yes, it’s easier, but, no, it doesn’t address the underlying problems.

There’s no good reason our tax system needs to be so convoluted, or for our tax filing process to be so burdensome. Similarly, there’s no good reason for our healthcare system to be so complicated. It should remember us; it should act as though it was talking to us rather than to other insiders within it.

Instead, the “medical industrial complex,” as Ms. Olen described it, adds layer upon layer, complexity upon complexity, cost upon cost, because doing so helps its revenue. If you think the tax code is complicated, try making sense of ICD-10 codes.

Perhaps once Ms. Olen and Professor Moran whip the IRS into shape they can take on healthcare.