US physicians spend an estimated $27.6 billion more each year on administrative costs in a health care system with multiple health insurance plans than Canadian physicians practicing in a single-payer system.
A new study published online today in Health Affairs reached that conclusion by comparing practice costs of 216 physicians and administrators in Ontario, Canada, with those of 862 counterparts in the United States. The surveys show that physician practices in Ontario spend $22 205 per physician per year in dealing with a single payer—just 27% of the $82 975 spent per physician annually on multiple insurers in the United States.
The study authors explain that the Canadian single-payer system has fewer managed care rules than US health plans. For example, US insurers may require prior authorizations for many individual services. US health insurers also offer different types of plans, each of which may have its own list of approved drugs and varied rules for billing, submitting claims, and resolving claims disputes.
Nurses and medical practice staff spend about 20.6 hours per week on administrative tasks in the United States, compared with 2.5 hours weekly in Canada, the findings show.
But the study authors note that higher US administrative costs resulting from multiple health plans should be weighed against “benefits that may arise from competition, innovation, and choice among insurance products.” While prior authorization rules increase costs for physicians and health plans, the rules may produce savings by decreasing inappropriate care, the authors add.
Coauthor Sean Nicholson, PhD, of Cornell University’s College of Human Ecology in Ithaca, NY, said the study is a tool that can help determine which rules in US health plans make cost-benefit sense.
“We hope … that informed decisions can be made by private and public health care insurers about what really works and what is not worth the money,” he said.