Health care paperwork cost US $812 billion in 2017, four times more per capita than Canada

Health care paperwork cost US $812 billion in 2017, four times more per capita than Canada

Press releases may be edited for formatting or style | January 07, 2020
A study published today (January 6) in the Annals of Internal Medicine finds that health care bureaucracy cost Americans $812 billion in 2017. This represented more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. The study estimated that cutting U.S. administrative costs to Canadian levels would have saved more than $600 billion in 2017.

Health administration costs were more than fourfold higher per capita in the U.S. than in Canada ($2,479 vs. $551 per person) which implemented a single-payer Medicare for All system in 1962. Americans spent $844 per person on insurers' overhead while Canadians spent $146. Additionally, doctors, hospitals, and other health providers in the U.S. spent far more on administration due to the complexity entailed in billing multiple payers and dealing with the bureaucratic hurdles insurers impose. As a result, hospital administration cost Americans $933 per capita vs. $196 in Canada. The authors note that in Canada hospitals are financed through lump-sum "global budgets" rather than fee-for-service, much as fire departments are funded in the U.S. Physicians' billing costs were also much higher in the U.S., $465 per capita vs. $87 per capita in Canada.

The analysis, the first comprehensive study of health administration costs since 1999, was carried out by researchers at Harvard Medical School, the City University of New York at Hunter College, and the University of Ottawa. The authors, who also performed the 1999 study, analyzed thousands of accounting reports that hospitals and other health care providers filed with regulators, as well as census data on employment and wages in the health sector. They obtained additional data from surveys of physicians and government reports.

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The researcher found that administration's share of overall U.S. health spending rose by 3.2 percentage points between 1999 and 2017, from 31.0 % to 34.2%. Of the 3.2 percentage point increase, most (2.4 percentage points) was due to the expanding role that private insurers have assumed in tax-funded programs such as Medicaid and Medicare. Private managed care plans now enroll more than one-third of Medicare recipients and a majority of those on Medicaid; Medicare and Medicaid now account for 52% of private insurers' revenues. Private insurers' increasing involvement has pushed up overhead in those public programs; private Medicare Advantage plans take 12% or more of premiums for their overhead, while traditional Medicare's overhead is just 2%, a difference of at least $1,155 per enrollee (per year).

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