Canada’s single-payer health system substantially cut admin costs compared with U.S.
The U.S. spends $2,497 per capita on administrative costs, compared to just $551 per capita in Canada.
The adoption by Canada of a single-payer system some 50 years ago has resulted in lower health care administration costs for our northern neighbor, compared to those in the U.S.
According to a study published in Annals of Internal Medicine, although both countries were comparable in the number of personnel working in administration, with Canada at 40.8 workers per 10,000 people compared with 43.8 workers per 10,000 in the U.S., by 2017 those numbers had diverged to the point that in the U.S. it stood at 129.7 people per 10,000 population, compared with just 88.9 in Canada.
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What is this in dollars? According the the report, $2,497 per capita in the United States (34.2 percent of national health expenditures), versus $551 per capita in Canada (just 17 percent of health expenditures). Additional differences include:
- $844 on insurance overhead in the U.S. versus $146 in Canada
- $933 versus $196 for hospital administration
- $465 versus $87 for physician costs
The study, conducted by David Himmelstein and Steffie Woolhandler, professors at the City University of New York, and Terry Campbell, the executive director of research operations and strategies at the University of Ottawa, found that between 1999 and 2017, increases in administrative costs were driven most by private insurers.
Researchers wrote, “The gap in health administrative spending between the United States and Canada is large and widening, and it apparently reflects the inefficiencies of the U.S. private insurance-based, multipayer system.”
Himmelstein, who is cofounder with Woolhandler of the single-payer advocacy group Physicians for a National Health Program, added, “It’s actually the data that guided us to the solution, the solution didn’t give rise to the data.”
Himmelstein and Woolhandler have served as unpaid policy advisers to Sen. Bernie Sanders, I-VT, and have also coauthored research manuscripts with Sen. Elizabeth Warren, D-MA.
The study concluded that private insurers were responsible for most of the administrative cost increase between 1999 and 2017, with 2.4 percentage points of the 3.2 percentage point increase in administrative costs as a share of overall health spending coming from the expanding role that private insurers have assumed in Medicare and Medicaid.
And while an initial economic analysis of Sanders’ Medicare for All proposal in 2017 produced by researchers at the University of Massachusetts at Amherst found that the loss of more than a million jobs in health care administration caused by a switch to a single-payer system would result in substantial administrative savings, that doesn’t necessarily mean that workers would be shut out in the cold.
Analysis author and University of Massachusetts professor Robert Pollin, who said, “The administrative simplicity [of single payer] means that we don’t need so many people working in private health insurance, and people working in providers’ offices and hospitals engaged in administration, and it’s the biggest single source of savings.” But the other side of the coin is that analysts expect Medicare for All would be a net job producer through lowering operating costs for small- and medium-sized businesses.
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