- Correction(s) for this article:
- CorrectionsSep 2020
Before Canada's single-payer reform, its payment system, health costs, and number of health administrative personnel per capita resembled those of the United States. By 1999, administration accounted for 31% of U.S. health expenditures versus 16.7% in Canada. No recent comprehensive analyses of those costs are available.
To quantify 2017 spending for administration by insurers and providers.
Analyses of government reports, accounting data that providers file with regulators, surveys of physicians, and census-collected data on employment in health care.
United States and Canada.
Insurance overhead; administrative expenditures of hospitals, physicians, nursing homes, home care agencies, and hospices.
U.S. insurers and providers spent $812 billion on administration, amounting to $2497 per capita (34.2% of national health expenditures) versus $551 per capita (17.0%) in Canada: $844 versus $146 on insurers' overhead; $933 versus $196 for hospital administration; $255 versus $123 for nursing home, home care, and hospice administration; and $465 versus $87 for physicians' insurance-related costs. Of the 3.2–percentage point increase in administration's share of U.S. health expenditures since 1999, 2.4 percentage points was due to growth in private insurers' overhead, mostly because of high overhead in their Medicare and Medicaid managed-care plans.
Estimates exclude dentists, pharmacies, and some other providers; accounting categories for the 2 countries differ somewhat; and methodological changes probably resulted in an underestimate of administrative cost growth since 1999.
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 prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden.
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Author, Article, and Disclosure Information
David U. Himmelstein,
City University of New York at Hunter College, New York, New York, and Harvard Medical School and Cambridge Health Alliance, Cambridge, Massachusetts (D.U.H., S.W.)
University of Ottawa, Ottawa, Canada (T.C.)
Acknowledgement: The authors thank Gilles Fortin, Program Consultant, Canadian Institute for Health Information, for invaluable assistance in obtaining and interpreting data on Canadian health care providers.
Financial Support: A grant from the Open Society Foundations assisted with the purchase of data from Statistics Canada and CIHI.
Disclosures: Dr. Himmelstein reports that he cofounded and remains active in the professional organization Physicians for a National Health Program. He has served as an unpaid policy advisor to Sen. Bernie Sanders and has coauthored research-related manuscripts with Sen. Elizabeth Warren. He received no remuneration for this work. Dr. Woolhandler reports that she cofounded and remains active in the professional organization Physicians for a National Health Program. She has served as an unpaid policy advisor to Sen. Bernie Sanders and has coauthored research-related manuscripts with Sen. Elizabeth Warren. She received no remuneration for this work. Authors not named here have disclosed no conflicts of interest. Disclosures can also be viewed at www.acponline.org/authors/icmje/ConflictOfInterestForms.do?msNum=M19-2818.
Corresponding Author: David U. Himmelstein, MD, 255 West 90th Street, New York, NY 10024; e-mail, dhimmels@hunter.
Current Author Addresses: Drs. Himmelstein and Woolhandler: City University of New York at Hunter College, 2180 Third Avenue, New York, NY 10035.
Ms. Campbell: Office of the Vice President for Research, University of Ottawa, Tabaret Hall, 550 Cumberland Street, Room 246, Ottawa, Ontario, Canada K1N 6N5.
Author Contributions: Conception and design: D.U. Himmelstein, T. Campbell, S. Woolhandler.
Analysis and interpretation of the data: D.U. Himmelstein, S. Woolhandler.
Drafting of the article: D.U. Himmelstein, S. Woolhandler.
Critical revision of the article for important intellectual content: D.U. Himmelstein, S. Woolhandler, T. Campbell.
Final approval of the article: D.U. Himmelstein, T. Campbell, S. Woolhandler.
Provision of study materials or patients: T. Campbell.
Statistical expertise: D.U. Himmelstein, S. Woolhandler.
Obtaining of funding: D.U. Himmelstein, S. Woolhandler.
Administrative, technical, or logistic support: T. Campbell.
Collection and assembly of data: D.U. Himmelstein, T. Campbell, S. Woolhandler.
This article was published at Annals.org on 7 January 2020.