Administrative Cost in Health Care Nov. 18, 2009.
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Administrative Cost in Health Care
Nov. 18, 2009
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Himmelstein and Woolhandler
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0%
5%
10%
15%
1960
1965
1970
1975
1980
1985
1990
1995
2000
Per
cent
of
GD
P
U.S.
Canada
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Americans Lead the World in Hours Worked
Source: International Labor Organization, 1999
1399
1560
1656
1731
1889
1883
1966
0 250 500 750 1000 1250 1500 1750 2000
Norway
Germany
France
U.K.
Japan
U.S. (1980)
U.S. (1997)
Hours/worker-year - 1997
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Poverty Rates, 1997U.S. and Other Industrialized Nations
Source: Luxembourg Income Study Working PapersNote: U.S. figure for 1997, other nations most recent available year
6%
8%
9%
11%
11%
11%
17%
0% 5% 10% 15% 20%
Netherlands
France
Sweden
Canada
UK
Germany
US
% of Population Below Poverty Level
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On the one hand,
• Greater poverty makes our health care system work harder
• But on the other hand …
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Poverty-related illness is partly an effect of our health care system
• Our system for health care financing exacerbates the effect of poverty on health
• by making the opportunity cost high for the poor to obtain health care
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Source: Oxford Rev Econ Pol 1989;5(1):89
Who Pays For Health Care?Regressivity Of U.S. Health Financing
3
1.75
1.31 1.27 1.23 1.15 1.1 1.07 0.99
0.64
0
0.5
1
1.5
2
2.5
3
3.5
POOREST RICHESTINCOME DECILE
Shar
e of
Hea
lth P
aym
ents
/Sha
re o
f In
com
e
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Source: Premier's Common Future Of Health, Excludes Out-of-Pocket Costs
Who Pays For Canada's NHP?Province Of Alberta
0.74 0.77 0.851
1.21.3 1.3
0
0.5
1
1.5
2
15,000 25,000 35,000 50,000 75,000 100 K 125 K
FAMILY INCOME
Shar
e of
Hea
lth P
aym
ents
/Sha
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of In
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e
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Why are hospital administrative costs less in Canada?
• Global budgets– Operating budget– Capital investment budget
• Negotiated with Province• No bills.• No need to track and bill for individual
services and goods
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Why are physicians’ administrative costs lower in Canada?
• Single payer• One place to send bills• One set of rules• T. R. Reid: France, Germany, Japan, though
with multiple competing private insurers, have– One system of submitting bills– One set of rules for what gets paid for– One set of prices
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Why are Canada’s system administrative costs lower?
• No need to determine who is eligible for what– Canada’s overall administrative % close to
Medicare (before Medicare + Choice), less than Medicaid
• No marketing of insurance• No billing or collecting insurance premiums
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Number of Insurance Products
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Private insurers’ High Overhead
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Variation in Medicare Spending:Some Regions Already Spend at Canadian Level
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Infant Deaths by Income, Canada 1996Even the Poor Do Better than U.S. Average
3.94.7 5.1 5.2
6.5
7.8
0123456789
Wealthiest20%
Middle20%
Poorest20%
U.S.Average
Infa
nt
Mo
rtali
ty
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Homeless in TorontoDeath Rate Elevated, But Lower than In
U.S.
Source: JAMA 2000; 283:2152
7301680
22273048
0500
10001500
2000250030003500
Toro
nto
Non
-Hom
eles
s
Toro
nto
Hom
eles
s
Bost
onH
omel
ess
New
Yor
kH
omel
ess
Annu
al D
eath
s Pe
r 100
,000
M
en A
ge 4
5-64
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What's OK in Canada? Compared to the U.S….
• Life expectancy 2 years longer
• Infant deaths 25% lower
• Universal comprehensive coverage
• More MD visits, hospital care; less bureaucracy
• Quality of care equivalent to insured Americans’
• Free choice of doctor/hospital
• Health spending 5/8 U.S. level
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What's the Matter in Canada?• One spigot makes it easy to cut flow of funds
• Government funding cuts → 30% of hospital beds closed during 1990s → waits and dissatisfaction
• But spigot has turned back up recently. Waits are shorter.
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“We believe we can make much progress in the [WTO] negotiations to allow the opportunity for U.S. businesses to expand into foreign healthcare markets ... public ownership of healthcare has made it difficult for U.S. private-sector healthcare providers to market in foreign countries.”
U.S. Coalition of Service Industries