Canada’s single-payer system less costly to run

Expense of private health care’s administration in U.S. is 4 times

higher, study finds
Some Canadians purchase private health insurance to supplement the government-
run single-payer system. Outpatient medications are not included in the
government plan. ( File Photo/Agence France-Presse)

By MELISSA HEALY
Los Angeles Times

In the United States, a legion of administrative health care workers and health
insurance employees who play no direct role in providing patient care costs every
American man, woman and child an average of $2,497 per year.

Across the border in Canada, where a single-payer system has been in place since
1962, the cost of administering health care is just $551 per person — less than a
quarter as much.

That spending mismatch, tallied in a study published last week in the Annals of
Internal Medicine, could challenge some assumptions about the relative efficiency
of public and private health care programs. It could also become a hot political
talking point on the American campaign trail as presidential candidates debate the
pros and cons of government-funded universal health insurance.

Progressive contenders for the Democratic nomination, including Sen. Bernie

Sanders of Vermont and Sen. Elizabeth Warren of Massachusetts, are calling for a
“Medicare for All” system. More centrist candidates, including former Vice
President Joe Biden and former South Bend, Ind., Mayor Pete Buttigieg, have
questioned the wisdom of turning the government into the nation’s sole health
insurer.
It’s been decades since Canada transitioned from a U.S.-style system of private
health care insurance to a government-run single-payer system. Canadians today
do not gnash their teeth about co-payments or deductibles. They do not struggle to
make sense of hospital bills. And they do not fear losing their health care coverage.

To be sure, wait times for specialist care and some diagnostic imaging are often
criticized as too long. But a 2007 study by Canada’s health authority and the U.S.
Centers for Disease Control and Prevention found the overall health of Americans
and Canadians to be roughly similar.

Some Canadians purchase private supplemental insurance, whose cost is regulated.

Outpatient medications are not included in the government plan, but aside from
that, coverage of “medically necessary services” is assured from cradle to grave.

The cost of administering this system amounts to 17% of Canada’s national

expenditures on health.

In the United States, twice as much — 34% — goes to the salaries, marketing
budgets and computers of health care administrators in hospitals, nursing homes
and private practices. It goes to executive pay packages which, for five major
health care insurers, reach close to $20 million or more a year. And it goes to the
rising profits demanded by shareholders.

Administering the U.S. network of public and private health care programs costs
$812 billion each year. And in 2018, 27.9 million Americans remained uninsured,
mostly because they could not afford to enroll in the programs available to them.

“The U.S.-Canada disparity in administration is clearly large and growing,” the

study authors wrote. “Discussions of health reform in the United States should
consider whether $812 billion devoted annually to health administration is money
well spent.”
The new figures are based on an analysis of public documents filed by U.S.
insurance companies, hospitals, nursing homes, home-care and hospice agencies,
and physicians’ offices. Researchers from Hunter College, Harvard Medical
School and the University of Ottawa compared those to administrative costs across
the Canadian health care sector, as detailed by the Canadian Institute for Health
Information and a trade association that represents Canada’s private insurers.

Compared to 1999, when the researchers last compared U.S. and Canadian health
care spending, the costs of administering health care insurance have grown in both
countries. But the increase has been much steeper in the United States, where a
growing number of public insurance programs have increased their reliance on
commercial insurers to manage government programs such as Medicare and
Medicaid.

As a result, overhead charges by private insurers surged more than any other
category of expenditure, the researchers found.

In U.S. states that have retained full control over their Medicaid programs, the
growth of administrative costs was negligible, they reported. (The same was true
for Canada’s health insurance program.) But in states that shifted most of their
Medicaid recipients into private managed care, administrative costs were twice as
high.

America’s Health Insurance Plans, a group representing private health insurance

companies, said administrative practices shouldn’t be blamed for escalating the
cost of care in the United States.

“Study after study continues to demonstrate the value of innovative solutions

brought by the free market,” AHIP said in a prepared statement. “In head-to-head
comparisons, the free market continues to be more efficient than government-run
systems.”

AHIP cited a recent report by the Medicare Payment Advisory Commission, an

independent body that advises Congress. The report showed that Medicare
Advantage plans — which are privately administered — deliver benefits at 88% of
the cost of traditional Medicare.

Even so, the study authors concluded that if the U.S. health care system could trim
its administrative bloat to bring it in line with Canada’s, Americans could save
$628 billion a year while getting the same health care.

“The United States is currently wasting at least $600 billion on health care
paperwork — money that could be saved by going to a simple ‘Medicare for All’
system,” said senior author Dr. Stephanie Woolhandler, a health policy researcher
at Hunter College and longtime advocate of single-payer systems.