US health care costs are higher because of administrative waste

post by Bill Gardner

The U.S. spends far more on health care than any other country in the world. For example, Canadians spent $3895 per capita in 2007, compared to $7290 in the U.S. There are many reasons why, but one disputed question is whether the U.S. has higher administrative costs than other developed countries. 

In Health Affairs (also summarized here) Morra and his colleagues report that physician practices in the U.S. spend far more time on administration than their Canadian peers. The chart reports the U.S. dollar value of the time spent by physicians and staff in the two countries. The U.S. physicians (blue bars) interact with multiple health plans on claims and billing, obtaining prior authorization for patient services, and dealing with pharmaceutical formularies. Canadians (red bars) deal primarily with a single provincial payer (Canadians can also hold supplemental private health care insurance).

The study also found that 

• Physician practices in the United States spent $82,975 per physician per year interacting with payers, compared with $22,205 in Ontario ( = $60,070 per physician per year extra cost in the United States). The cost of time spent by U.S. nurses and U.S. clerical staff were both greater than total Canadian costs.
• If U.S. physicians had administrative costs similar to those of Ontario physicians, their total savings would be approximately $27.6 billion per year.
• In the U.S., nurses and medical assistants spent 20.6 hours per physician per week on administrative tasks related to health plans, nearly 10 times the 2.5 hours spent by Canadian nursing staff. U.S. nursing staff spent more time in every category of interactions, most notably obtaining prior authorizations, which accounted for 13.1 hours per physician per week.

Please keep in mind that the study is considering only the administrative burden carried by clinicians and their staff. It does not include the hours of time spent by patients making sure that they have authorizations for care, checking bills against explanation of benefit forms, and searching for providers who take their insurance. These costs are also higher for U.S. patients, compared to Canadians.

There are significant problems in Canadian health care. Nevertheless, Canadians have better health at less cost than Americans. One important reason is that Canadian physicians and nurses spend more time on patients, and less time on paperwork.