The cost of health-care paperwork in America in 2017 was $812, which is 4 times more per capita than in Canada. This study published in the Annals of Internal Medicine links rising bureaucracy at 34.2 percent of health spending to rising overheads for private insurers, and suggests that cutting American administrative costs to that equivalent to Canadian levels would have saved more than $600 billion in 2017 alone.
The $812 billion spent on bureaucracy in 2017 accounted for more than one-third of total spending on physician visits, hospitals, long-term care and health insurance. According to the paper entitled: “Health Care Administrative Costs in the United States and Canada, 2017,” researchers estimate the reduction of over-priced American administrative costs to match levels in Canada would have saved easily over $600 billion. Per capita health administration costs were $2,479 in America vs. just $551 per person in Canada that implemented a single payer Medicare.
Americans spent $844 per person on overheads of insurers while in Canada that number was only $146, and American physicians, hospitals, and health care providers spent more on administration because of the difficulty of paying multiple payers and coping with all the bureaucratic hurdles levied by insurers resulting in US hospital administration costs of $933 per capita versus $196 Canadian. Canadian hospitals are also financed by lump sum national budgets rather than service fees close to how they are operated by American fire departments. Furthermore, the insurance rates of American doctors were also higher in Canada as $465 per capita versus just $87.
This analysis was performed by researchers from Harvard Medical School, the City University of New York, and the University of Ottawa, and is the first comprehensive study of health administration costs since 1999; and the same authors have conducted the study in 1999 by reviewing thousands of financial records issued by hospitals and other healthcare providers submitted to regulators and census authorities. Administrative share of overall American health expenditure was found to have increased by 3.2 percent from 31 percent to 43.2 percent between 1999 and 2017, which was due to the growing role private insurers assumed in tax-funded programs such as Medicare and Medicaid. Private managed care plans now enroll over one third of Medicare recipients and the majority of Medicaid recipients; this now accounts for 52 per cent of the revenues of private insurers.
The rising participation has caused overhead increases in those public programs; private Medicare Advantage plans take 12 percent more premiums for their overhead with conventional Medicare overhead being only 2 percent reflecting a gap of at least $1,155 per enrollee annually.