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U.S. health administration costs 300% higher than in Canada
Multi-payer system: Privately managed care a 'monstrosity,' economist says
Brad Evenson National Post Thursday, August 21, 2003
http://www.nationalpost.com/national/story.html?id=03E24528-2A19-4BB9-8F83

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The U.S. health care system spends over 300% more on administration than
the Canadian system, a new Harvard Medical School study has found.  And
researchers say the hundreds of billions in extra spending do not make
patients healthier. "Health [systems] with the highest administration costs
tend to have the lowest clinical quality," said study co-author Steffie
Woolhander, an associate professor of medicine at Harvard. The study is
published today in the New England Journal of Medicine.

When hands-on medical costs were excluded, the cost of treating a U.S.
patient in 1999 was US$1,059, more than triple the Canadian cost of US$307.
 The researchers said the United States could trim US$209-billion by
adopting the "parsimonious" Canadian-style system. Dr. Woolhander said the
problem with the Canadian health system is that it does not spend enough on
medical care, which results in long waiting lists for treatment. Americans
spend about US$5,600 per patient -- 83% more than is spent in Canada. "From
our point of view, your funding is too low but your system is very good,"
she said.

"We have a systemic problem here. There is lots of money sloshing around,
yet we have 41 million people with no health insurance, seniors who can't
afford medications, and multiple other problems."  Academics blame much of
the spending on the multi-payer system of privately managed care in the
United States. "I look at the U.S. health care system and see an
administrative monstrosity, a truly bizarre mélange of thousands of
payers with payment systems that differ for no socially beneficial reason,"
economist Henry Aaron of the Brookings Institution, a U.S. think-tank,
wrote in a related commentary.

However, Mr. Aaron said Americans would never accept a Canadian-style
health care system. "The U.S. health care administration, weird though it
may be, exists for fundamental reasons, including a pervasive popular
distrust of centralized authority," he wrote. Mr. Aaron also disputed the
estimated savings of switching to a single-payer Canada system -- he puts
it at US$159-billion. Much of the U.S. red tape arises from disputes
between insurance companies over who pays for care. "A lot of patients I
see have three or even four insurance companies paying," said Dr. Vernon
Lister, a Miami doctor.

"And every company wants to dispute the bill. They've got armies of people
doing nothing but bean counting, and not one of them is doing anything to
improve patient care. Not one." Studies from other countries show the
greater the number of payers, the higher the costs. Germany, for example,
has a public health system but multiple payers. As a result, its
administrative costs are much higher than Canada's but lower than in the
United States.  As U.S. health care has grown in complexity, so has its
employee rosters.   Between 1969 and 1999, the number of administrators --
including clerks, consultants and managers -- rose to 27.3% from 18.2%. In
Canada, it grew to 19.1% in 1996 from 16% in 1971. For example, one of the
biggest U.S. private health plans, WellPoint, looks after 10.1 million
customers and has 13,900 administrative staff. By contrast, the Ontario
Health Insurance Plan covers 11.7 million people with about 1,400
employees. Insurance overhead eats up the lion's share of the U.S.
administrative costs, at US$259 per patient in 1999 compared with US$47 in
Canada. U.S. hospitals spent US$315 per patient on administration, while
Canadian hospitals spent US$103.

bevenson AT nationalpost.com © Copyright  2003 National Post