September 2011
Morra D, Nicholson S, Levinson W, Gans DN, Hammons T, Casalino LP. Health Affairs. 2011;30(8):1443–1450.
Background
Much research has described the high administrative costs inherent in the U.S. multi-payer health care system as compared to the predominantly single-payer systems of some other countries. For example, a seminal 2003 paper by Woolhandler, Campbell, and Himmelstein found that in 1999, per-capita administrative costs in Canada were only 29% of the US administrative costs, more than 2/3 lower than in the US.1 In this e-round, we describe new evidence about the burden of administering insurance claims, affirming that US physician practices spend nearly 4 times more money, and almost 60 more hours per week, than do Canadian physicians.
In Canada, most patients have full coverage for doctor visits from their provincial health plan, and billings are sent electronically to a single payer in each province. Prior authorization from the Health Ministry for treatment is not necessary. In the US, by contrast, most physicians must bill whichever payer insures each of their patients, from a selection of thousands of insurers, each with hundreds of different benefit plans, all having different claims processing protocols. In the name of “managing care”, prior authorization for care frequently is required, adding another administrative hurdle. Interacting with multiple insurance plans about claims and coverage, coupled with the time and labor devoted to billing patients, explains nearly all the higher administrative costs incurred by physician practices in the US as compared to Canada.
