Administrative Cost in Health Care Nov. 18, 2009

Himmelstein and Woolhandler

Americans Lead the World in Hours Worked Source: International Labor Organization, Norway Germany France U.K. Japan U.S. (1980) U.S. (1997) Hours/worker-year

Poverty Rates, 1997 U.S. and Other Industrialized Nations Source: Luxembourg Income Study Working Papers Note: U.S. figure for 1997, other nations most recent available year 6% 8% 9% 11% 17% 0%5%10%15%20% Netherlands France Sweden Canada UK Germany US % of Population Below Poverty Level

On the one hand, Greater poverty makes our health care system work harder But on the other hand …

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

Source: Oxford Rev Econ Pol 1989;5(1):89 Who Pays For Health Care? Regressivity Of U.S. Health Financing POORESTRICHEST INCOME DECILE Share of Health Payments/Share of Income

Source: Premier's Common Future Of Health, Excludes Out-of-Pocket Costs Who Pays For Canada's NHP? Province Of Alberta ,00025,00035,00050,00075, K125 K FAMILY INCOME Share of Health Payments/Share of Income

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

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

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

Number of Insurance Products

Private insurers’ High Overhead

Variation in Medicare Spending: Some Regions Already Spend at Canadian Level

Infant Deaths by Income, Canada 1996 Even the Poor Do Better than U.S. Average

Homeless in Toronto Death Rate Elevated, But Lower than In U.S. Source: JAMA 2000; 283: Toronto Non-Homeless Toronto Homeless Boston Homeless New York Homeless Annual Deaths Per 100,000 Men Age 45-64

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

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.

“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