Administration costs of health care systems in Canada vs. the U.S.

[tex-wyo-dem]

This study by the New England Journal of Medicine investigated the administration costs of the systems in Canada and the U.S. from 1999 data. I'm sure now the gap in these numbers is probably even wider.

Costs of Health Care Administration in the United States and Canada

Steffie Woolhandler, M.D., M.P.H., Terry Campbell, M.H.A., and David U. Himmelstein, M.D.

ABSTRACT

Background A decade ago, the administrative costs of health care in the United States greatly exceeded those in Canada. We investigated whether the ascendancy of computerization, managed care, and the adoption of more businesslike approaches to health care have decreased administrative costs.

Methods For the United States and Canada, we calculated the administrative costs of health insurers, employers' health benefit programs, hospitals, practitioners' offices, nursing homes, and home care agencies in 1999. We analyzed published data, surveys of physicians, employment data, and detailed cost reports filed by hospitals, nursing homes, and home care agencies. In calculating the administrative share of health care spending, we excluded retail pharmacy sales and a few other categories for which data on administrative costs were unavailable. We used census surveys to explore trends over time in administrative employment in health care settings. Costs are reported in U.S. dollars.

Results In 1999, health administration costs totaled at least $294.3 billion in the United States, or $1,059 per capita, as compared with $307 per capita in Canada. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada. Canada's national health insurance program had overhead of 1.3 percent; the overhead among Canada's private insurers was higher than that in the United States (13.2 percent vs. 11.7 percent). Providers' administrative costs were far lower in Canada.

Between 1969 and 1999, the share of the U.S. health care labor force accounted for by administrative workers grew from 18.2 percent to 27.3 percent. In Canada, it grew from 16.0 percent in 1971 to 19.1 percent in 1996. (Both nations' figures exclude insurance-industry personnel.)

Conclusions The gap between U.S. and Canadian spending on health care administration has grown to $752 per capita. A large sum might be saved in the United States if administrative costs could be trimmed by implementing a Canadian-style health care system. (bold emphasis mine)

Read the entire article here: http://content.nejm.org/cgi/content/full/349/8/768

[Canuckistanian]

1. There you go

It's what we've been saying all along. Good to see the actual numbers.

And if the same study were done today, the disparities would be greater.

[napi21]

2. I suspect a lot of the increase in the US admin costs in HC are from

the excessive greed of the top people in administration, the same as it was in the financial businesses.

I've been gtiping about the excessive compensation of senior people in all businesses for years, but the only thing I knew that would change it was their stock holders, and most of them were on the receiving end of those $$, so they weren't about to do anything! I's hopeful that this disastrous recession will poke them all in the eye hard enough to make that change!

[MrScorpio]

3. Why do you hate America?

Why not celebrate the fact that American health administrators are some of the best money makers in the world?

YAY, Capitalism!

[Demoiselle]

4. Krugman did a column not long ago...

Compared administrative costs of Medicare/Medicaid with private health insurers in this country:

20 cents of every dollar spent by private insurers is spent on administration.
3 cents of every dollar spent by Medicare/Medicaid is spent on administration.

He said that the 17 cent administrative cost difference went for the salaries paid to all those functionaries who figure out reasons to deny your claim.
I don't think he was even figuring in the profit motive!

Sorry, no link....too long ago. But I've never forgotten it.

[newtothegame]

5. To be fair, anymore than 3 cents of every Medicaid/Medicare dollar going elsewhere but the doctors..

and not a single physician would accept those patients. Many in our town already don't because they lose money on every single one..

[eridani]

6. There are funding problems with Medicare because it has no access

--to the billions that are wasted on private insurance premiums.