Single-payer savings

By Jonathan B. Kotch, M.D.
The Herald-Sun (Durham, N.C.), Letters, Sept. 18, 2014

Early indications are that the Affordable Care Act may be slowing down medical cost increases, but the potential for significant cost savings is nil as long as we tolerate outrageous administrative costs.

In a study that appeared this week in the prestigious journal Health Affairs, researchers found that hospital bureaucracy consumed 25.3 percent of hospital budgets in the United States in 2011, far more than in other nations. Administrative costs were lowest (about 12 percent) in Scotland and Canada, whose single-payer health care systems fund hospitals through global, lump-sum budgets, much as a fire department is funded in the U.S.

The authors attribute the high administrative costs in the U.S. to two factors: (1) the complexity of billing a multiplicity of insurers with varying payment rates, and (2) the entrepreneurial imperative for hospitals to amass profits (or, in the case of nonprofit hospitals, surpluses) in order to fund the modernization and upgrades essential to institutional survival.

The authors state that single-payer reform could save $150 billion annually on hospital overhead. Unless we reshaped health care financing under a single, public payer, we can’t hope to get a handle on runaway health care costs.

Dr. Jonathan Kotch resides in Durham.