Medical Bookkeeping Costs U.S. $812 Billion a Year

Medical paperwork cost the United States $812 billion in 2017 and accounted for more than one-third of total spending for doctor visits, hospitals, long-term care and health insurance, according to a new study.

However, reducing medical paperwork expenses to the same levels as in Canada -- which has single-payer universal health care -- would have saved the nation more than $600 billion in 2017, the researchers said.

"Americans spend twice as much per person as Canadians on health care. But instead of buying better care, that extra spending buys us sky-high profits and useless paperwork," said study lead author Dr. David Himmelstein. He's a professor at City University of New York's Hunter College and lecturer in medicine at Harvard Medical School.

"Before their single-payer reform, Canadians died younger than Americans, and their infant mortality rate was higher than ours. Now Canadians live three years longer and their infant mortality rate is 22% lower than ours," Himmelstein said in a Physicians for a National Health Program news release. "Under Medicare for All, Americans could cut out the red tape and afford a Rolls Royce version of Canada's system."

According to the study, health administration costs in 2017 were more than fourfold higher per person in the United States than in Canada ($2,479 versus $551 per person). And U.S. spending on insurers' overhead was $844 per person compared with $146 per person in Canada.

Doctors, hospitals, and other health providers in the United States spent far more on administration because they have to bill multiple payers and cope with bureaucratic rules imposed by insurers, the study noted.

For example, U.S. hospital administration cost $933 per person compared with $196 per person in Canada.

The study also said that U.S. doctor billing costs were much higher ($465 a person) than in Canada ($87 a person).

Between 1999 and 2017, administration's share of overall U.S. health spending rose from 31% to 34.2%. Most of that increase was due to the expanding role of private insurers in tax-funded programs such as Medicaid and Medicare, the researchers said.

Private managed-care plans now enroll more than one-third of Medicare recipients and a majority of those on Medicaid/Medicare. And Medicare and Medicaid now account for 52% of private insurers' revenues, the investigators said.

Private insurers' increasing involvement has increased overhead in those public programs. Overhead accounts for 12% or more of premiums in private Medicare Advantage plans, compared with 2% of premiums in traditional Medicare's overhead, a difference of at least $1,155 per enrollee annually, according to the researchers.

The estimates likely underestimate U.S. health care administrative costs, the authors said.

"Medicare for All could save more than $600 billion each year on bureaucracy, and repurpose that money to cover America's 30 million uninsured and eliminate copayments and deductibles for everyone," study senior author Dr. Steffie Woolhandler said in the release.

Woolhandler is a professor at Hunter College and lecturer in medicine at Harvard Medical School.

The study was published Jan. 6 in the journal Annals of Internal Medicine.

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