Administrative Cost in Health Care

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Administrative Cost in Health Care

• Nov. 18, 2009

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Himmelstein and Woolhandler
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Americans Lead the World in Hours Worked
Source International Labor Organization, 1999
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Poverty Rates, 1997U.S. and Other Industrialized
Nations
Source Luxembourg Income Study Working
PapersNote U.S. figure for 1997, other nations
most recent available year
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On the one hand,

• Greater poverty makes our health care system work
  harder
• But on the other hand

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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

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Who Pays For Health Care? Regressivity Of U.S.
Health Financing
Source Oxford Rev Econ Pol 19895(1)89
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Who Pays For Canada's NHP?Province Of Alberta
Source Premier's Common Future Of Health,
Excludes Out-of-Pocket Costs
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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

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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

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Why are Canadas system administrative costs
lower?

• No need to determine who is eligible for what
• Canadas overall administrative close to
  Medicare (before Medicare Choice), less than
  Medicaid
• No marketing of insurance
• No billing or collecting insurance premiums

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Number of Insurance Products
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Private insurers High Overhead
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Variation in Medicare
Spending Some Regions Already Spend at Canadian
Level
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Infant Deaths by Income, Canada 1996Even the
Poor Do Better than U.S. Average
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Homeless in TorontoDeath Rate Elevated, But
Lower than In U.S.
Source JAMA 2000 2832152
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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

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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.

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U.S. Coalition of Service Industries

• 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.