The High Cost of Paperwork: Why Administrative Waste Is Holding Healthcare Back

And how a capitated payment model can free resources for true community health.

When most people hear that the United States spends more on healthcare than any other country, they assume the money goes to hospitals, doctors, or medications. But a surprisingly large portion—between 25% and 30% of all healthcare spending—never touches a patient at all. It pays for administration.

That means up to one out of every three dollars in our healthcare system goes to tasks like billing, insurance authorization, credentialing, coding, claims processing, and other paperwork that keeps the system running but rarely improves anyone’s health.

For rural and underserved communities, where every dollar matters, this administrative burden is especially damaging.

The Healthy Communities Initiative (HCI) is working to build a different kind of health system—one that puts people and prevention first. A key part of that new model is shifting from traditional fee-for-service payments to a capitated payment system that reduces waste and unlocks resources for community-based care.

Why Are Administrative Costs So High?

In the traditional U.S. fee-for-service environment, every visit, every test, every procedure requires:

• Billing codes

• Claims submissions

• Documentation to justify reimbursement

• Insurance verification

• Possible prior authorization

• Appeals and resubmissions

Providers and hospitals must maintain large billing departments to navigate this maze, while insurers maintain equally large teams to review and deny/approve claims. It is an adversarial, expensive, and time-consuming system.

Worse, it diverts money away from actual health improvement—particularly prevention.

How Capitated Payments Change the Equation

A capitated payment model flips the incentives completely.

Instead of billing every service separately, a capitated system provides a fixed payment per person (per member per month, or PMPM) to deliver defined services to a population.

What disappears under a capitated model?

• No billing for each service

• No coding each encounter

• No claims processing

• No pre-authorization

• No reimbursement delays

• No complex fee schedules

• Fewer administrative staff required

When providers receive a predictable, fixed payment, they can focus on keeping people healthy—not on maximizing billable encounters.

What grows under a capitated model?

• Flexibility to invest in prevention

• Freedom to tackle social determinants of health

• Ability to fund community health workers

• Stable, predictable budgets

• Incentives to keep people out of the hospital

• Innovation in care delivery

Instead of rewarding volume, capitation rewards value—particularly the value of prevention and early intervention.

Capitation + HCI: A Natural Fit

The Healthy Communities Initiative was designed for a world where prevention is financially supported—not punished.

1. HCI’s model eliminates billing overhead entirely.

Our CHWs do not code visits or file claims. Their work is people-centered, not paperwork-centered.

2. Capitation provides predictable funding for community-based prevention.

A PMPM model directly supports:

• Door-to-door outreach

• CHW salaries

• Transportation assistance

• Food access support

• Medication management

• Data systems for tracking outcomes

• Partnerships with local organizations

3. Administrative costs drop dramatically.

Under capitation, administrative overhead can fall to 5% or less—compared with today’s 25–30%.

That means more dollars go into communities, where they can make the biggest difference.

4. Capitation incentivizes exactly what HCI does best: reducing unnecessary acute-care use.

When health systems benefit financially from keeping people well, community-based prevention becomes a core strategy—not an afterthought.

What Would This Mean for Rural America?

Imagine communities like Phillips County receiving predictable, flexible funding to address health problems before they become emergencies.

Imagine a world where CHWs are valued as essential preventive workforce—not as a “nice-to-have” add-on.

Imagine being able to reinvest administrative savings directly into:

• Blood pressure control

• Heart disease prevention

• Housing stability

• Food security

• Transportation to appointments

• Prescription access

That is the promise of capitation aligned with HCI.

A Smarter Way to Pay for Health

The U.S. healthcare system will never fully solve its cost crisis while administrative waste consumes up to 30% of all spending. Capitated payments offer a practical, proven path to reducing that waste—and redirecting resources toward what actually matters: helping people live longer, healthier lives.

The Healthy Communities Initiative is ready to lead the way. By combining capitated financing with community-driven preventive care, HCI offers a new blueprint for health in America—especially for rural communities that have too often been left behind.

Let’s Build the Future Together

HCI is more than a program. It’s a movement. A movement to shift power, resources, and decision-making back to communities. A movement to leave behind administrative waste and build something that works.A movement to invest in people—not paperwork.