Seems everybody has a horror story about health insurance: Kafkaesque debates with robotic agents about what is and isn’t covered. Huge bills from a doctor you didn’t know was “out of network.” Reimbursements that take months to process.

It’s no secret that healthcare in the United States is tangled in wasteful red tape. A study in 2019 estimated that administrative complexity was the single biggest source of waste in healthcare—bigger even than fraud or over-pricing—and imposes an annual cost of $265 billion.

The true extent of that waste, according to a new study led by Jeffrey Pfeffer at the Stanford Graduate School of Business, is even more shocking. Pfeffer and his colleagues found that administrative “sludge” in healthcare insurance costs employers and the economy billions of dollars in squandered work time, employee stress, absenteeism, and reduced productivity.

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