Match!

Costs of Health Care Administration in the United States and Canada

Published on Aug 21, 2003in The New England Journal of Medicine70.67
· DOI :10.1056/NEJMsa022033
Steffie Woolhandler50
Estimated H-index: 50
(Harvard University),
Terry Campbell3
Estimated H-index: 3
(Harvard University),
David U. Himmelstein51
Estimated H-index: 51
(Harvard University)
Sources
Abstract
background A decade ago, the administrative costs of health care in the United States greatly exceeded those in Canada. We investigated whether the ascendancy of computerization, managed care, and the adoption of more businesslike approaches to health care have decreased administrative costs. methods For the United States and Canada, we calculated the administrative costs of health insurers, employers’ health benefit programs, hospitals, practitioners’ offices, nursing homes, and home care agencies in 1999. We analyzed published data, surveys of physicians, employment data, and detailed cost reports filed by hospitals, nursing homes, and home care agencies. In calculating the administrative share of health care spending, we excluded retail pharmacy sales and a few other categories for which data on administrative costs were unavailable. We used census surveys to explore trends over time in administrative employment in health care settings. Costs are reported in U.S. dollars. results In 1999, health administration costs totaled at least 294.3 billion in the United States, or ,059 per capita, as compared with 307 per capita in Canada. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada. Canada’s national health insurance program had overhead of 1.3 percent; the overhead among Canada’s private insurers was higher than that in the United States (13.2 percent vs. 11.7 percent). Providers’ administrative costs were far lower in Canada. Between 1969 and 1999, the share of the U.S. health care labor force accounted for by administrative workers grew from 18.2 percent to 27.3 percent. In Canada, it grew from 16.0 percent in 1971 to 19.1 percent in 1996. (Both nations’ figures exclude insurance-industry personnel.) conclusions The gap between U.S. and Canadian spending on health care administration has grown to 52 per capita. A large sum might be saved in the United States if administrative costs could be trimmed by implementing a Canadian-style health care system.
Figures & Tables
  • References (31)
  • Citations (445)
📖 Papers frequently viewed together
200351.27JAMA
101 Citations
382 Citations
4 Authors (James S. Kahn, ..., David N. Gans)
68 Citations
78% of Scinapse members use related papers. After signing in, all features are FREE.
References31
Newest
50 CitationsSource
Background: Canadians are engaged in an intense debate about the relative merits of private for-profit versus private not-for-profit health care delivery. To inform this debate, we undertook a systematic review and meta-analysis of studies comparing the mortality rates of private for-profit hospitals and those of private not-for-profit hospitals. Methods: We identified studies through an electronic search of 11 bibliographical databases, our own files, consultation with experts, reference lists,...
217 Citations
The authors analyzed health maintenance organizations' administrative costs and quality measures from the National Committee for Quality Assurance's Quality Compass database for the years 1997–2000. HMOs with higher administrative overhead had consistently worse quality scores in univariate analysis. Multivariate analyses controlling for geographic region (all years) and HMO model type (1997 and 1998 analyses only) confirmed that higher administrative costs were associated with lower quality. Ex...
14 CitationsSource
#1Stephen HefflerH-Index: 16
#2Katharine R. LevitH-Index: 26
Last. Mark S. FreelandH-Index: 11
view all 7 authors...
132 CitationsSource
#1Frank A. Sloan (Duke University)H-Index: 63
#2Gabriel Picone (USF: University of South Florida)H-Index: 16
Last. Shin-Yi Chou (NJIT: New Jersey Institute of Technology)H-Index: 21
view all 4 authors...
This paper compares cost and quality of care for Medicare patients hospitalized in for-profit hospitals contrasted with those in nonprofit and government hospitals following admission for hip fracture, stroke, coronary heart disease, or congestive heart failure. Cost of care in for-profit hospitals was similar to that of nonprofits, but patients admitted to government hospitals incurred less Medicare payments on average. There were only small differences in survival between for-profit, nonprofit...
216 CitationsSource
#1David Grembowski (UW: University of Washington)H-Index: 28
#2Paula Diehr (UW: University of Washington)H-Index: 59
Last. Cornelia M. UlrichH-Index: 69
view all 8 authors...
STUDY AIMS: (1) To develop indexes measuring the degree of managedness and the covered benefits of health insurance plans, (2) to describe the variation in these indexes among plans in one health insurance market, (3) to assess the validity of the health plan indexes, and (4) to examine the association between patient characteristics and the health plan indexes. Measures of the "managedness" and covered benefits of health plans are requisite for studying the effects of managed care on clinical p...
34 Citations
: Using the results of a 1995 nationally representative survey of physicians, this paper examines the relationship between exposure to managed care and resources expended by physicians on administrative and insurance matters. Our measures of managed care exposure are the degree to which a physician experiences a variety of managed care techniques (i.e., utilization review, capitation payment, restricted panels, gatekeepers, discounted fees, compensation links to utilization measures, profiling, ...
15 Citations
#1Mark V. PaulyH-Index: 64
#2Allison PercyH-Index: 4
Last. Bradley J HerringH-Index: 15
view all 3 authors...
PROLOGUE: In a system dominated by private group health insurance, individual coverage has never been a very attractive option for most people. Indeed, for several reasons, less than 7 percent of the population obtains nongroup health insurance. It's unaffordable for many people—in part because of very high administrative costs—and it may be difficult to obtain for some persons who have preexisting medical conditions. But as policymakers search for other private-sector alternatives to job-based ...
46 CitationsSource
#1David U. Himmelstein (Harvard University)H-Index: 51
#2Steffie Woolhandler (Harvard University)H-Index: 50
Last. Sidney M. WolfeH-Index: 20
view all 4 authors...
Context The proportion of health maintenance organization (HMO) members enrolled in investor-owned plans has increased sharply, yet little is known about the quality of these plans compared with not-for-profit HMOs. Objective To compare quality-of-care measures for investor-owned and not-for-profit HMOs. Design, Setting, and Participants Analysis of the Health Plan Employer Data and Information Set (HEDIS) Version 3.0 from the National Committee for Quality Assurance's Quality Compass 1997, whic...
194 CitationsSource
Background and Methods We studied the effects of admission to a teaching hospital on the cost and quality of care for patients covered by Medicare (age, 65 years old or older). We used data from the National Long Term Care Survey and merged them with Medicare claims data. We selected the first hospitalization for hip fracture (802 patients), stroke (793), coronary heart disease (1007), or congestive heart failure (604) occurring between January 1, 1984, and December 31, 1994, and calculated all ...
257 CitationsSource
Cited By445
Newest
We analyze the extent to which three important factors can explain the high costs of health care in the US relative to the UK: (i) the high cost of medical education, (ii) high risks/costs associated with malpractice litigation, and (iii) excessive diagnostic testing arising from the practice of defensive medicine. To do this we formulate, calibrate and simulate a model of the demand and supply of physicians, the labor supply and treatment decisions of practicing physicians, and the market for m...
Source
Measures favoring healthy lives among populations around the world are essential to reduce social inequalities. Mutual funds could play an important role funding these measures if they are able to attract socially concerned investors by improving their wealth. This study analyzes the financial performance of mutual funds focused on the biotechnology and healthcare sectors related to UN sustainable development goal 3 (SDG 3), comparing their risk-adjusted return with that achieved by conventional...
Source
#2Dennis Q. ChenH-Index: 1
Last. Brian C. WernerH-Index: 23
view all 4 authors...
Abstract Background Despite increasing demands on physicians and hospitals to increase value and reduce unnecessary costs, reimbursement for healthcare services has been under downward pressure for several years. This study aimed to analyze the trend in hospital charges and payments relative to corresponding surgeon charges and payments in a Medicare population for total hip (THA) and knee arthroplasty (TKA). Methods The 5% Medicare sample database was used to capture hospital and surgeon charge...
2 CitationsSource
#1Ryan A. Crowley (American College of Physicians)H-Index: 5
#2Hilary Daniel (American College of Physicians)H-Index: 5
Last. Lee S. Engel (LSU Health Sciences Center New Orleans)H-Index: 15
view all 4 authors...
This paper is part of the American College of Physicians' policy framework to achieve a vision for a better health care system, where everyone has coverage for and access to the care they need, at a cost they and the country can afford. Currently, the United States is the only wealthy industrialized country that has not achieved universal health coverage. The nation's existing health care system is inefficient, unaffordable, unsustainable, and inaccessible to many. Part 1 of this paper discusses...
12 CitationsSource
#1David U. Himmelstein (CUNY: City University of New York)H-Index: 51
#2Terry Campbell (U of O: University of Ottawa)H-Index: 3
Last. Steffie Woolhandler (CUNY: City University of New York)H-Index: 50
view all 3 authors...
Background: 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. Objective: To quantify 2017 spending for administration by insurers and providers. Design: Analyses of government reports, accounting data that providers file with r...
4 CitationsSource
#1Bel Germà (University of Barcelona)H-Index: 37
#2Marc Esteve (UCL: University College London)H-Index: 12
ABSTRACT:The question of whether private organizations can outperform public ones in public service delivery has been a major topic of interest over the last few decades. However, the empirical evi...
2 CitationsSource
#1Pat Armstrong (York University)H-Index: 17
#2Hugh Armstrong (Carleton University)H-Index: 16
From a neoliberal perspective, governments should steer and not row; competitive markets provide effective, quality services; and individuals should take responsibility for much of their own health. These assumptions provide the basis for privatisation, a process with multiple forms that are often quite complicated and difficult to see. More of the costs of services and more of the labour are shifted to individuals and families, management in public services follows practices imported from the f...
Source
#1J. Kim Penberthy (UVA: University of Virginia)H-Index: 11
#1J. Kim PenberthyH-Index: 1
view all 2 authors...
Physicians and bureaucrats have fundamentally different incentives within the healthcare industry. These differences are reflected in their training, agendas, and the way they think. We assert that these differences lead to tension, disruption, and inefficiencies in the healthcare system and to burnout and other maladaptive behavior in physicians. In this chapter, we explore the physicians’ dilemma in modern medicine, including the evolution of their particular approach to healthcare, and the un...
Source
#1Spencer Lewis (UM: University of Michigan)H-Index: 5
#2Ravi N. Srinivasa (UCLA: University of California, Los Angeles)H-Index: 6
view all 6 authors...
Abstract Purpose To quantify cost drivers for thoracic duct embolization based on time-driven activity-based costing methods. Materials and Methods This was an Institutional Review Board-approved (HUM00141114) and Health Insurance Portability and Accountability Act-compliant study performed at a quaternary care institution over a 14-month period. After process maps for thoracic duct embolization were prepared, staff practical capacity rates and consumable equipment costs were analyzed via a time...
1 CitationsSource
#1Rachel RamoniH-Index: 1
#1Rachel B. Ramoni (VA: United States Department of Veterans Affairs)H-Index: 18
Rachel Ramoni is chief research and development officer for the Department of Veterans Affairs, where she oversees 2,000 active projects at more than 100 sites.
3 CitationsSource