American VS Canadian Hospitals (Getty Images/Salon)

American health care system costs four times more than Canada's single-payer system

Average Americans pay $2,497 a year for insurance overhead and admin costs, while Canadians pay just $551

Igor Derysh
February 15, 2020 3:00PM (UTC)








"The U.S.-Canada disparity in administration is clearly large and growing," the study's authors wrote. "Discussions of health reform in the United States should consider whether $812 billion devoted annually to health administration is money well spent."

The increase in costs was driven in large part due to private insurers' growing role in administering publicly-funded Medicare and Medicaid programs. More than 50% of private insurers' revenue comes from Medicare and Medicaid recipients, according to the study. Roughly 12% of premiums for private Medicare Advantage plans are spent on overhead, compared to just 2% in traditional Medicare programs. Medicaid programs also showed a wide disparity in costs in states that shifted many of their Medicaid recipients into private managed care, where administrative costs are twice as high. There was little increase in states that have full control over their Medicaid programs.



The average American spent $933 in hospital administration costs, compared to $196 in Canada, according to the research. Americans paid an average of $844 on insurance companies' overhead, compared to $146 in Canada. Americans spent an average of $465 for physicians' insurance-related costs, compared to $87 in Canada.

"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 authors wrote. "The prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden."


Despite the massive difference in administrative costs, a 2007 study by the Centers for Disease Control and Canada's health authority found that the overall health of residents in both countries is very similar, though the US actually trails in life expectancy, infant mortality, and fitness.


"Americans spend twice as much per person as Canadians on health care. But instead of buying better care, that extra spending buys us sky-high profits and useless paperwork," said Dr. David Himmelstein, the study's lead author and a distinguished professor at Hunter College. "Before their single-payer reform, Canadians died younger than Americans, and their infant mortality rate was higher than ours. Now Canadians live three years longer and their infant mortality rate is 22% lower than ours. Under Medicare for All, Americans could cut out the red tape and afford a Rolls Royce version of Canada's system."


Himmelstein later told Time that the difference in administrative costs between the two countries would "not only cover all the uninsured but also eliminate all the copayments and deductibles."

"And, frankly, have money left over," he added.




"Medicare for All could save more than $600 billion each year on bureaucracy, and repurpose that money to cover America's 30 million uninsured and eliminate copayments and deductibles for everyone," she said. "Reforms like a public option that leave private insurers in place can't deliver big administrative savings. As a result, public option reform would cost much more and cover much less than Medicare for All."

Igor Derysh


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