Administrative costs, here and in Canada

from Costs of Health Care Administration in the United States and Canada by Steffie Woolhandler, M.D., M.P.H., Terry Campbell, M.H.A., and David U. Himmelstein, M.D.

In Table 1, the authors [admitting that the numbers are imprecise] attempt to break out the various administrative costs in the two health care systems. Ours costs more. No surprise there.


Table 2 is a bit more interesting. The percentage of health care employees [doctors offices, hospitals, clinics, etc] in the US who are administrative or clerical has grown over the years. This isn't proof that the insurance industry is the cause of this growth, but if you've ever had a lengthy, complicated, expensive illness, you've dealt with more than your share of these people. >Bryan has some related info.


My apologies if Table 3 is unreadable here. If you click on it, a larger version should appear.

How many insurance company employees does it take to screw you out of your hard-earned dollars, and try to deny you decent health care? In Canada, it takes about 1.5 employees to deliver Canadian Medicare to 10,000 enrollees [patients, or potential patients]. In the US, it takes 23.5 employees to deliver for-profit health insurance to the same 10,000 enrollees.

Forgetting for the moment how to calculate and compare administrative costs between two very different systems, how about if we just assume, and it's a reasonable assumption, that we could dispense with 90% of those employees? This would bring it down to about 2.5 employees per 10,000 users of health care services. Even if the salaries + benefits of those employees only add up to a paltry $20,000 per year per employee, that's roughly $3 billion per year that could be spent on doctors, nurses, orderlies, pharmacists, and other truly useful people.

What are those approximately 150,000 displaced insurance workers going to do? They can do like the rest of us who have lost jobs to re-engineering, right-sizing, down-sizing, out-sourcing, and off-shoring: get another job. I wouldn't mind paying them to mop the floors in the hospitals, or take my blood pressure at the doctor's office, but I'll be damned if they ought to get any money from me for the purposes of denying me the insurance I paid for.

Speaking of denials, I didn't stumble over this until last night, but there's a whole denial managment industry out there. That's right, if we scrap the for-profit insurance industry, we're also going to put a bunch of people out of work whose job it is now to try to get the insurance companies to pay those claims that get filed.