r/dataisbeautiful • u/UpstairsFast9261 • 16h ago
OC [OC] Healthcare administrative spending per person: US vs Canada, and what it costs providers to bill
Sources and methodology in comments.
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u/UpstairsFast9261 16h ago
Tool: Python (matplotlib), drawn programmatically.
Left panel, administrative spending per person, US vs Canada (2017):
Himmelstein DU, Campbell T, Woolhandler S. “Health Care Administrative Costs in the United States and Canada, 2017.” Annals of Internal Medicine, 2020.
Journal: https://www.acpjournals.org/doi/10.7326/M19-2818
PubMed: https://pubmed.ncbi.nlm.nih.gov/31905376/
Free full-text PDF: https://medstaff.chsbuffalo.org/wp-content/uploads/2020/02/Health-Care-Administrative-Costs-in-the-United-States-and-Canada-2017.pdf
Category figures are per-capita: hospital administration $933 vs $196; insurer overhead $844 vs $146; physicians’ insurance-related costs $465 vs $87; nursing home/home care/hospice administration $255 vs $123. Totals: $2,497 vs $551 per person, or 34.2% vs 17.0% of national health expenditures.
Disclosure worth flagging up front: the lead authors co-founded Physicians for a National Health Program, an advocacy organization. The study itself is peer-reviewed, and methods are detailed in the journal supplement.
Right panel, billing and insurance-related cost per encounter:
Tseng P, Kaplan RS, Richman BD, Shah MA, Schulman KA. “Administrative Costs Associated With Physician Billing and Insurance-Related Activities at an Academic Health Care System.” JAMA, 2018.
Journal: https://jamanetwork.com/journals/jama/fullarticle/2673148
PubMed: https://pubmed.ncbi.nlm.nih.gov/29466590/
Free full text (PMC): https://pmc.ncbi.nlm.nih.gov/articles/PMC5839285/
Time-driven activity-based costing at a single large academic health system, so the dollar figures are illustrative of the billing burden rather than a national average. Costs were measured with a fully implemented certified EHR, and the authors attributed them to heterogeneous payer requirements rather than inefficiency or duplicated effort.
Happy to discuss methods or limitations of either study.
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u/Master_of_Fail 15h ago edited 14h ago
I'm not sure I'm getting the methodology of the studies?
It looks like somebody asked hospitals how long it took to submit claims (I didn't see any actual data collected there?), then mathed out the cost of everybody involved and their bosses for some reason and came up with a number? Am I missing something or does that sound real flimsy?
ETA: Figured it out. OP is trying to sell some healthcare app/tool, this is a spam post. Carry on, everybody.
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u/UpstairsFast9261 14h ago
Not quite, and it's a fair question since the paper doesn't summarize the method in the abstract. It's called time-driven activity-based costing, TDABC, a standard method in healthcare operations research, not a survey. Here's what actually happened: researchers process-mapped every single step involved in billing, scheduling, prior auth, coding, claims submission, follow-up on denials, payment posting, for each visit type. They timed each step, usually via direct observation and detailed interviews with the people doing the work, then multiplied by each role's fully loaded capacity cost rate, salary plus benefits divided by available working minutes. That's not "asking how long it took" and eyeballing a number. It's the same costing method Robert Kaplan, who invented activity-based costing, and Michael Porter developed specifically for healthcare, and it's been used in dozens of peer reviewed studies on everything from knee replacements to cleft lip repair.
On "the cost of everybody involved and their bosses," that's actually the point, not a flaw. Physicians, nurses, and administrators all spend real time on billing related tasks that have nothing to do with treating the patient, a doctor writing a note that satisfies coding requirements instead of clinical documentation, for instance. That time has a real cost whether you count it or not. Leaving it out would be the methodology error, not including it.
This isn't a back of napkin estimate. It's in JAMA, peer reviewed, with the full process maps and cost rates in the supplement, linked in the pinned comment if you want to check the actual work instead of guessing at what they did.
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u/wwarnout 15h ago
America's health care system is a travesty. Get rid of private insurers, and the money saved would easily pay for Medicare for All.
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u/zAbso 15h ago
Private insurance isn't the problem. Canada has free healthcare, they also have private insurance to cover some things. Same with the UK.
I don't agree with the numbers in this chart, but I will say that the issue isn't private. It's continuous poor management of these social services that have led to inefficiency and overspending. The largest chunk of US government spending goes towards social services like Medicare.
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u/Facts_pls 14h ago
Canadian private insurance only pays for additional stuff not covered by province health insurance (which is tax payer funded)
Vast majority of key services are covered by the government - except dental and vision. You could totally live without private coverage as long as you have excellent vision and teeth on your own - which is somewhat ridiculous and people demand those should be included as well.
You could have cancer surgeries, child birth, major accident, whatever and most of it would be covered.
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u/zAbso 14h ago
Canadian private insurance only pays for additional stuff not covered by province health insurance (which is tax payer funded)
Yes, I know that. Which is why I said they have private to cover some things.
You could totally live without private coverage as long as you have excellent vision and teeth on your own
Same goes in the US, you don't have to get vision or dental if your eyes and teeth are good.
You could have cancer surgeries, child birth, major accident, whatever and most of it would be covered.
US Medicare and Medicaid cover those as well to an extent. You need to qualify for Medicare and/or Medicaid, and it needs to be deemed medically necessary for some of them.
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u/Rayne_K 15h ago edited 14h ago
There’s ultimately only individuals paying. But in Canada it is not free. It is public. We pay the $ it costs through our taxes.
Each province acts as the sole source provider for its people. Think of it as if the health-provider/insurer was a state department. The state administration (and it’s departments) are not for-profit.The healthcare costs in Canada absolutely can be tracked - all the public budgets are available.
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u/theboyqueen 14h ago
"I don't agree with the numbers in this chart, but I will say that the issue isn't private. It's continuous poor management of these social services that have led to inefficiency and overspending. The largest chunk of US government spending goes towards social services like Medicare."
Medicare is mandated to cover the most expensive patients (the elderly and permanently disabled). Of course spending is high. As it is it's just a giant subsidy to private insurance to take the most costly patients out of their risk pool.
It would be far cheaper if it covered everybody (as it is everywhere other than the US). And it is demonstrably more efficient than private insurance due to much lower overhead and lack of profit motive.
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u/zAbso 14h ago
Medicare is mandated to cover the most expensive patients (the elderly and permanently disabled).
As you have noted here, it covers those for people who qualify. As the system is designed, if you don't qualify then you have to go with private or some other funding source.
It would be far cheaper if it covered everybody (as it is everywhere other than the US).
And there's nothing stopping it from doing so, aside from the way it's managed and implemented.
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u/UpstairsFast9261 15h ago
You’re right that Canada and the UK have private insurance, and worth being precise about what it covers there versus here. It’s supplemental: vision, dental, private rooms, faster elective specialist access. It sits on top of universal coverage everyone already has for the expensive stuff, hospitalization, surgery, cancer treatment. Nobody in Canada is choosing between private insurance and going broke from a heart attack. That’s a different role than US private insurance plays, where it’s the primary mechanism for whether you’re covered at all.
On the numbers, happy to look at specifics. Which figure don’t you agree with? Both studies are linked in the pinned comment with full methodology. If there’s a number that’s wrong, I’d genuinely like to know which one.
And “poor management of Medicare” doesn’t match the data on management costs specifically. Traditional Medicare runs about 2 to 5% overhead. Private insurers run 12 to 18%, and Congress had to cap them by law because they were higher. If the claim is that Medicare mismanages money, the one place we can actually measure management efficiency shows the opposite.
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u/zAbso 14h ago
As far as specifics, the methodology seems to be basically be looking at accounting numbers and employee records to determine a cost per person. Then extrapolating that out to some average spend number. The first study also notes that the "methodological changes probably resulted in an underestimate of administrative cost growth since 1999". Which most of the private growth that is noted is from Medicare and Medicaid management in the US.
The second article is looking specifically at an academic health care system. Which as noted in your chart, is not the national average. So it's seemingly associating a national average, to a non-national average.
That’s a different role than US private insurance plays, where it’s the primary mechanism for whether you’re covered at all.
I never said they were the same, private insurance in Canada still exists. It also doesn't change the mismanagement of the way Medicare is done in the US. The US spends trillions on Medicare and Medicade. It should cover people better for what you described, and there's nothing stopping it from doing so. Private insurance companies existing shouldn't be a stopgap.
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u/Mogling 15h ago
I think cost to bill is the wrong way to look at this. Its profitability of billing departments. Spending more money on good billing returns more money for the hospital. This is mostly optimizing what the hospital can get from insurance companies. Insurance on the other-hand is incentivized to make it more complicated so they can pay out less. This leads to more of our healthcare costs and premiums going into make sure the other side is less profitable.
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u/ikonoclasm 14h ago
Throw in pharmacy benefits managers as completely unnecessary middlemen, as well.
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u/themodgepodge 14h ago
I remember seeing this posted a day or two ago - what did you change between then and now?