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Running the US Health Care System Costs 4 Times More Than Canada’s

By CHAR ADAMS

The United States spends $2,497 per person to cover its health system’s administration costs. In contrast, Canada pays just $551 per person thanks to its single-payer system. That means the U.S. health system costs over four times more to run than Canada’s, according to a new study published in Annals of Internal Medicine.

In the study, titled “Health Care Administrative Costs in the United States and Canada, 2017,”  Hunter College Professors David Himmelstein and Steffie Woolhandler, along with fellow researchers, examined both nations’ 2017 costs. The authors found that the U.S. administrative costs have increased in the last 20 years, largely due to the health system’s reliance on private providers and insurers. Canada utilizes a single-payer health care system, in which a single public agency is responsible for financing people’s health care as opposed to multiple competing health insurance companies.

“The difference [in administrative costs] between Canada and the U.S. is enough to not only cover all the uninsured but also to eliminate all the copayments and deductibles, and to amp up home care for the elderly and disabled,” Himmelstein told TIME. “And frankly to have money left over.”

The U.S. spent $812 billion on administration costs in 2017, or $2,497 per capita, compared with Canada’s $551 per capita, according to the study. These costs account for 34.2% of the nation’s health expenditures, the researchers found.

The authors looked at administrative costs for several categories: insurance companies, relevant government agencies, physician practices, hospices, home care agencies, and nursing homes.

The news comes as the U.S. health care system remains a hot button issue on the road to the 2020 election. Some candidates, like Massachusetts Sen. Elizabeth Warren and Sen. Bernie Sanders of Vermont, have criticized the country’s private health care insurance system while others do not support a single-payer system.

The researchers predict that if the current system remains, administrative costs will likely continue to rise.

“The gap in health administrative spending between the United States and Canada is large and widening, and it apparently reflects the inefficiencies of the U.S. private insurance–based, multipayer system,” the researchers concluded in the study. “The prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden.”

 

Beyond SUM

Explore This Work

Health Care Administrative Costs in the United States and Canada, 2017
Annals of Internal Medicine, 2020

Work By

David Himmelstein (Distinguished Professor at School of Urban Public Health at Hunter College, Urban Public Health) | Profile 1
Steffie Woolhandler (Distinguished Professor at School of Urban Public Health at Hunter College, Urban Public Health) | Profile 1

Colleges and Schools

Hunter College