On January 8 2020, MSN.com aggregated a Los Angeles Times article, which reported that Americans pay four times as much per capita for health care than Canadians did under their country’s single-payer healthcare program:
In the United States, a legion of administrative health care workers and health insurance employees who play no direct role in providing patient care costs every American man, woman and child an average of $2,497 per year.
Across the border in Canada, where a single-payer system has been in place since 1962, the cost of administering health care is just $551 per person — less than a quarter as much.
Several of the article’s talking points were excerpted in social media posts, and the first few sentences involved specific figures for the claims the piece made. The article held that American citizens on average spent $2,497 per person per year on the cost of healthcare overall. By contrast, Canadians purportedly paid less than a fourth of that for their single-payer coverage, averaging out to about $551 per Canadian, per year.
Noting that a joint survey of the two countries between 2002 and 2003 the “found the overall health of Americans and Canadians to be roughly similar” for the costs borne, the article explained:
It’s been decades since Canada transitioned from a U.S.-style system of private health care insurance to a government-run single-payer system. Canadians today do not gnash their teeth about co-payments or deductibles. They do not struggle to make sense of hospital bills. And they do not fear losing their health care coverage.
Subsequently, it suggested that 17 percent of Canada’s total spending went to healthcare costs, a figure that jumped to 34 percent for the United States. That disparity was attributed in part to the costs of administration for private insurance companies (as well as salaries and bonuses):
In the United States, twice as much — 34% — goes to the salaries, marketing budgets and computers of health care administrators in hospitals, nursing homes and private practices. It goes to executive pay packages which, for five major health care insurers, reach close to $20 million or more a year. And it goes to the rising profits demanded by shareholders.
The reporting involved a cluster of hot-button 2020 election talking points, mainly calls to transition the United States to a universal or single-payer healthcare system (often called “Medicare For All, or M4A.”) But its source was not a political organization — the figures came from the journal Annals of Internal Medicine in January 2020:
— Annals of Int Med (@AnnalsofIM) January 6, 2020
On January 7 2020, Annals of Internal Medicine published a study, “Health Care Administrative Costs in the United States and Canada, 2017.” As indicated by the title, figures and metrics used in researchers’ calculations came from the year 2017, contrasted between the United States and Canada.
in 2017 "U.S. insurers and providers spent $812 billion on administration, amounting to $2497 per capita (34.2% of national health expenditures) versus $551 per capita (17.0%) in Canada" https://t.co/GWuUwqFW93
— ryan cooper (@ryanlcooper) January 7, 2020
The study listed three authors: David U. Himmelstein, MD, Terry Campbell, MHA, and Steffie Woolhandler, MD, MPH. In a separate “Disclosures” section, Annals of Internal Medicine noted Himmelstein and Woolhandler advised political campaigns, but were not paid for that work. Additionally, Himmelstein disclosed membership in a physicians’ group supporting the adoption of single-payer healthcare:
Dr. Himmelstein reports that he cofounded and remains active in the professional organization Physicians for a National Health Program. He has served as an unpaid policy advisor to Sen. Bernie Sanders and has coauthored research-related manuscripts with Sen. Elizabeth Warren. He received no remuneration for this work. Dr. Woolhandler reports that she cofounded and remains active in the professional organization Physicians for a National Health Program. She has served as an unpaid policy advisor to Sen. Bernie Sanders and has coauthored research-related manuscripts with Sen. Elizabeth Warren. She received no remuneration for this work. Authors not named here have disclosed no conflicts of interest.
Full text for the study was not available to the general public, restricted solely for subscribers to that publication:
In the days after its release, news organizations examined its findings and methodologies. TIME reported on some of the metrics used by the research authors in arriving at the per capita figures between the United States and Canada:
Along with Himmelstein, co-authors Steffie Woolhandler and Terry Campbell examined administrative costs for insurance companies and government agencies that administer healthcare, as well as costs in four settings: hospitals, nursing homes, home care agencies and hospices and physician practices. For each category, the researchers determined which costs were administrative and conducted analyses to adjust comparisons between relative costs in the U.S. and Canada.
Insurers’ overhead, the largest category, totaled $275.4 billion in the U.S. in 2017, or 7.9% of all national health expenditures, compared with $5.36 billion in Canada, or 2.8% of national health expenditures. The American number included $45 billion in government spending to administer health care programs and $229.5 billion in private insurers’ overhead and profits, which covers employer plans and managed care plans funded by Medicare and Medicaid.
This insurance overhead accounted for most of the total increase in administrative spending in the U.S. since 1999, according to the study.
That reporting pointed to previous research, which also examined ways to reduce costs under the current American private insurance system. Himmelstein asserted that a “magnitude of savings” could, in his opinion, only be realized in a single-payer system like the Canadian one:
Himmelstein says his study shows that a public option that preserves private insurance wouldn’t provide the same savings as a traditional single-payer system. “We could streamline the bureaucracy to some extent with other approaches, but you can’t get nearly the magnitude of savings that we could get with a single payer,” Himmelstein says, adding, “If the Medicare public option includes the Medicare Advantage plans, it’s actually conceivable that the public option would increase the bureaucratic costs.”
Moreover, Himmelstein described the cost estimates for the United States in 2017 were likely “conservative,” meaning he believed the actual numbers were higher. That disparity hinged on portions of the figures based on physicians’ estimates of office hours expended interacting with insurance companies and their employees:
Himmelstein says his team’s estimates of total U.S. administrative costs in the Annals study are likely conservative. When estimating physicians’ administrative costs, the researchers relied on a 2011 study of time spent by physicians and their staffs interacting with insurers. And he notes that while 2017 data was often the latest available when they were conducting this study, 2018 health spending numbers have since come out showing further increases in insurance overhead.
Those blind spots were identified in a “Limitations” portion of the study’s abstract, along with other areas not covered by the research:
Estimates exclude dentists, pharmacies, and some other providers; accounting categories for the 2 countries differ somewhat; and methodological changes probably resulted in an underestimate of administrative cost growth since 1999.
Under the “Results” section of the abstract, Himmelstein et al reported the same figures used in the Los Angeles Times report and others:
U.S. insurers and providers spent $812 billion on administration, amounting to $2497 per capita (34.2% of national health expenditures) versus $551 per capita (17.0%) in Canada: $844 versus $146 on insurers’ overhead; $933 versus $196 for hospital administration; $255 versus $123 for nursing home, home care, and hospice administration; and $465 versus $87 for physicians’ insurance-related costs. Of the 3.2–percentage point increase in administration’s share of U.S. health expenditures since 1999, 2.4 percentage points was due to growth in private insurers’ overhead, mostly because of high overhead in their Medicare and Medicaid managed-care plans.
In the abstract’s “Conclusions” tab, Himmelstein et al maintained Americans remained in the dark about the costs of insurance companies due to “a hidden surcharge” tacked on to many of their bills:
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 prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden.
We located a PDF version of the 2017 study in its entirety. That complete version began with background about Canada’s healthcare system versus that of the United States, and how they became so radically different:
Around the same time [57 years prior), Canada and the United States embarked on a different experiment. Before the 1960s, the 2 nations had similar health care systems. Subsequently, Canada’s provinces implemented single payer programs that displaced private insurers, whereas the United States added new public coverage for seniors (Medicare) and some of the poor population (Medicaid), while leaving private insurers in place.
Authors also described their methodology at the start:
We sought data on administrative costs in insurance firms and government agencies that administer health care payment and in 4 clinical settings: hospitals, nursing homes, home care agencies and hospices, and physicians’ practices. Data are for 2017, or the most recent available year.
For providers, we estimated administrative expenditures nationally by multiplying nationwide spending for each provider type by the percentage of revenues devoted to administration by such providers. Per capita estimates use population denominators from the U.S
In the body of the study, the respective per capita cost figures appeared with a longer explanation regarding their calculations:
Health care administrative costs in the United States in 2017 totaled $812.0 billion, $2497 per capita ($2696 per insured person), or 34.2% of total spending in the categories for which data are available. The comparable estimates for Canada are $551 per capita ($593, assuming U.S. wage rates in doctors’ offices), or 17.0% of expenditures. The difference amounts to over $1900 per capita (or over $2100 per insured person), equivalent to more than $600 billion in excess administrative spending in the United States.
In an expanded “Discussion” section, Himmelstein et al reiterated:
Administration accounts for one third of United States health care expenditures, twice the amount in Canada. The gap in dollars per capita is even larger: a greater than 4-fold disparity.
In the lead-up to elections in the United Kingdom in late 2019, JOE.co.uk produced a video titled “British people guess how much U.S. healthcare costs.” That clip rapidly reached more than 25 million Facebook users, and featured “man on the street” style interviews with British people attempting to guess the cost of commonplace healthcare procedures and services in the United States. (People also created “Americans reacting to British people reacting …” videos.)
A description for the video read:
Ambulance callout? $2,500. Childbirth? $30,000.
This is what you’d be paying for healthcare if you lived in the USA. Our NHS is not for sale.
Invariably, those interviewed were shocked at the price tag of services in the United States for things like breaking a bone, having a baby, or being transported in an ambulance:
Perhaps inevitably, commenters from the England, Australia, and the United States weighed in about their experiences with their respective countries’ healthcare administration systems. One commenter from the United States addressed the cited $30,000 cost of having a baby in that country:
30k is cheap!! The hospital charges for me and my daughter (complicated delivery, nearly a week in the hospital due to pre-[eclampsia], and baby was in NICU) were 100k!!!! Thankfully my insurance covered it after we paid about 2k. The hospital continues to send me bills saying they are owed even more, despite my insurer paying them.
The US healthcare system is a disaster. Don’t let anyone convince you it’s somehow “better”.
Another American and self-identified political conservative responded:
I’m a very conservative American, and I love capitalism and our freedoms more than anything……BUT………our healthcare/insurance systems are a complete farse.
My fiancée has type 1 diabetes, and we can barely afford her insulin and supplies. An insulin pump is $6k after insurance. Have to be on a 5 yr payment. It’s like having a car note just for the pump. And insurance will only approve of one from Medtronic, no other company.
I love capitalism. Capitalism isn’t the problem though. It’s the lobbyists and back room deals, kickbacks, and price gouging by big pharma that’s killing us.
This has been a problem here for 40+ years. It didn’t just happen overnight, and it didn’t happen bc of Trump or Obama, but it IS getting worse.
Allowing pharma to run ads on tv and in print for new meds encourages a lot of our issues too.
But our insurance companies and big pharma are the biggest culprits, bc they’ve run amuck with raping the poor.
The cure for polio was sold for $1. If it happened now, it would be $50k per shot.
I believe in capitalism, but not in medicine.
Articles claimed that a study had found that Americans paid more than four times as much money for healthcare services and products per capita than their Canadian counterparts with single-payer coverage. That claim was true; the figures were derived from research published on January 7 2020 in the journal Annals of Internal Medicine. Authors of the study disclosed their involvement in political consulting (albeit unpaid) and single-payer supporting organizations in healthcare. Nevertheless, their work was reviewed and published in a medical journal.