Costs of Health Care Administration: U.S. vs. Canada
Proponents of a Canadian-style, single-payer health care system for the U.S. argue that excessive administrative costs represent a serious problem in multi-payer systems. In this analysis, Harvard researchers compared administrative costs in the U.S. and Canadian health care systems. In August 2003, these same authors co-authored a proposal for single-payer national health care insurance in the U.S. (JAMA 2003; 290:798).
Using a variety of sources, the researchers calculated the fiscal-year 1999 administrative costs of health care insurers, employers’ health care benefit programs, hospitals, office practices, nursing homes, and home health care agencies in both countries. The estimated per capita cost of health care administration was US$1059 in the U.S. and US$307 in Canada. These costs accounted for 31% and 17% of health care spending in the U.S. and Canada, respectively. The average overhead cost for U.S. private insurers was 11.7%; in contrast, this figure was 3.6% for U.S. Medicare and 1.3% for Canadian provincial insurance plans.
Comment: Although these researchers acknowledge limitations in their data,
their analysis suggests strongly that a single-payer system would yield Substantial savings in administrative costs. Elsewhere, the authors and others have argued that such savings essentially could fund health care for the uninsured segment of the U.S. population. In an accompanying editorial, an economist from the Brookings Institution contends that the authors have exaggerated the difference in administrative costs in the U.S. and Canada;
he also questions whether these comparisons provide useful guidance to policy makers, given the differing political histories and institutions in the 2 countries.
— Allan S. Brett, MD
Published in Journal Watch September 2, 2003
Source
Woolhandler S et al. Costs of health care administration in the United
States and Canada. N Engl J Med 2003 Aug 21; 349:768-75.
Aaron HJ. The costs of health care administration in the United States and
Canada — Questionable answers to a questionable question. N Engl J Med
2003 Aug 21; 349:801-3.