By Maxwell Strachan
VICE, January 8, 2020
Capitalist though it may be, the U.S. healthcare industry is a bureaucratic, inefficient and unnecessarily complicated mess, which has created a highly lucrative paper-pushing industry that is unnecessarily costing already-broke Americans hundreds of billions of dollars a year, according to a new study published this week in the Annals of Internal Medicine.
The healthcare industry’s bureaucratic administrative costs set Americans back $812 billion in 2017, or just under $2,500 per person. Another way to think about those numbers: 34 percent of all U.S. costs related to “doctor visits, hospitals, long-term care and health insurance” essentially came from paperwork, according to the analysis, which was performed by researchers at Harvard Medical School, the City University of New York at Hunter College, and the University of Ottawa.
If you look at those numbers and think “Well, maybe that’s just what things cost,” please know this: You’re wrong. That same year, our neighbors to the North, Canada, spent $551 per person on their own health-care administration, or less than one-fourth what we did, which amounts to only 17 percent of their total national healthcare expenditures. Cut U.S. administrative costs to that level, the researchers calculate, and you’ve saved the country more than $600 billion a year. Congratulations.
Not enough for you? Let’s do some U.S. vs Canada comparisons of some more specific per-person administrative costs:
- Nursing home, home care, and hospice administration: $255 in the U.S.; $123 in Canada.
- Physicians’ insurance-related costs: $465 in the U.S.; $87 in Canada.
- Insurers’ overhead: $844 in the U.S.; $146 in Canada.
- Hospital administration: $933 in the U.S.; $196 in Canada.
So, what gives? Well, for one thing, Canada implemented a publicly funded universal healthcare system all the way back in 1962 that streamlined a lot of the administrative bullshit. Hospitals there are funded through “global budgets that set overall expenditure targets or limits (as opposed to fee-for-service arrangements),” according to Canada’s government website.
Who has lots of fee-for-service healthcare arrangements? Americans do, that’s who! As they say, time is money, and there is a lot of time being spent trying to deduce who owes whom what and when in our exceptionally complicated current insurance system. Ever entered a protracted and maddening multi-pronged battle with a doctor, hospital, and insurance company over an out-of-network bill? That’s some good old-fashioned administration, baby.
As the Los Angeles Times noted, these high administrative costs aren’t exactly leading Americans to the pinnacle of health and wellness. One 2007 study by the U.S. and Canadian governments found our overall health outcomes to be basically the same.
The share of the U.S. healthcare industry that can be lumped into the “administration” bucket has actually increased by around 3 percent since 1999, when the same researchers last performed the same analysis, and most of the reason can be boiled down to “the expanding role that private insurers have assumed in tax-funded programs such as Medicaid and Medicare.”
Not only that, but the researchers also believe their assessment might underestimate how much administrative costs have grown since 1999 for a variety of reasons. For one, they weren’t able to study administrative costs in dentistal care in 2017 like they were back in 1999, since the data for 2017 wasn’t available. So, yeah, it could be even worse than we think.
“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,” the authors write in the study’s abstract. “The prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden.”
Unsurprisingly, the study’s researchers support a Medicare for All-type system.