It’s a huge cost hidden in plain sight, and every year it sucks an average of nearly $2,500 out of the pocket of every American. What’s this multi-billion-dollar cash drain? It’s useless medical overhead caused by our wasteful medical system. According to this just-published article from Reuters, written by reporter Linda Carroll, a new study comparing U.S. healthcare costs with the single-payer system in Canada has determined that as much as one-third of all healthcare spending in America goes to bureaucracy, feeding billions in medical overhead into a bloated and inefficient insurance scheme.
Cutting Medical Overhead Could Save Hundreds of Billions Annually
According to the study, which you can access here on the website of the Annals of Internal Medicine, insurance companies and medical providers in the U.S. spent more than $800 billion purely on administrative costs in 2017. That’s almost $2,500 per person, the new study reports, which is about four times what Canada spends per capita on that country’s single-payer system. Researchers estimate that if the U.S. were to spend the same per capita on healthcare as Canada, about $550, it would save our country over $600 billion annually, enough to cover the entire cost of the Medicaid program. “Over one third of all healthcare costs in the U.S. were due to insurance company overhead and provider time spent on billing,” Reuters reports. That compares with about 17 percent spent on administration in Canada.
The study’s lead author, distinguished professor of public health Dr. David Himmelstein, put it bluntly. “The average American is paying more than $2,000 a year for useless bureaucracy,” he states. “That money could be spent for care if we had a ‘Medicare for all program’,” an expansion which some 2020 presidential candidates have advocated and which the current administration vigorously opposes.
Comparing Medical Overhead in the U.S. vs. Canada Reveals Striking Differences
After sifting through reams of U.S. and Canadian billing data, Himmelstein’s research team found striking disparities between per capita overhead spending north of the border versus south. Some examples:
- Insurer overhead accounted for $844 in the U.S. versus $146 in Canada;
- Hospital administration was $933 here versus $196 in Canada;
- Nursing home, home care and hospice administration in the U.S. cost $255 versus $123 up north;
- Physicians’ insurance-related costs were $465 in the U.S. versus $87 in Canada.
When researchers looked at traditional Medicare, they found that the cost of overhead for the American system – about 2 percent – compares favorably with Canada’s single-payer plan. But the cost of overhead in Medicare Advantage plans, the policies offered by private insurance companies that now cover about a third of Medicare beneficiaries, is six times higher than Medicare’s overhead costs.
Sky-High Medical Overhead Costs are the Result of a “Tug of War”
Why are administrative costs so high in the U.S.? “It’s because the insurance companies and health care providers are engaged in a tug of war, each trying in its own way to game the system,” according to Dr. Himmelstein. One example he cited is the process known as upcoding. “How a patient’s treatment is coded can make a huge difference in the amount insurance companies pay. For example, Hammerstein said, if a patient comes in because of heart failure and the visit is coded as an acute exacerbation of the condition, the payment is significantly higher than if the visit is simply coded as heart failure. This upcoding of patient visits has led insurance companies to require more and more paperwork backing up each diagnosis,” resulting in vastly more hours spent on documentation and billing.
Doctors are also getting sucked in to the vortex of time-consuming overhead. One example: in order to meet insurance company requirements and to justify their treatment recommendations, American doctors have to write far more detailed notes on each patient than foreign doctors. As Dr. Himmelstein told Reuters, medical research has documented the impact: “Notes from U.S. physicians,” he said, “were four times longer to meet the bureaucratic requirements of the payment system.”
The research done by Dr. Himmelstein and his colleagues marked the first new study in two decades comparing costs in the U.S. and Canada. “It’s clear that health costs in the U.S. have soared,” one health policy expert stated. This study shows that, as a nation, “We’re paying for an inefficient and wasteful fee-for-services system.”
Rajiv Nagaich Has Common Sense Answers to Your Retirement Questions
“The United States of America spends practically $10,000 per person on healthcare,” Rajiv observes. “But do we have the best healthcare system? No! It’s fine for those who can afford Cadillac medicine, maybe, but for many Americans we’re spending a ton of money and getting a substandard product.” He adds, “Is there an explanation? Sure – it’s all about profit. When it comes to healthcare, people have to be wise consumers, or else they’re in danger of making bad decisions and paying the price.”
That approach is also part of the problem when it comes to retirement planning. As we always remind our radio listeners and seminar guests here at AgingOptions, retirement planning that is truly strategic has to be multi-faceted, allowing each element to reinforce the others. These key components – medical protection, legal protection, housing plans, financial plans, and family communication – are all part of an AgingOptions LifePlan, and once you have one in place, you will hold in your hands a blueprint that will let you build the retirement you’ve always dreamed of.
We invite you and your guests to come learn more about this retirement planning breakthrough. Join Rajiv at an upcoming LifePlanning Seminar. These information-packed, free events are held in locations from Bellingham to Olympia so there’s bound to be one convenient for you. Visit our Live Events page for all the currently-scheduled seminars – then register online for the event of your choice, or call us during the week. Experience peace of mind in retirement like you never thought possible with an AgingOptions LifePlan. Age on!
(originally reported at www.reuters.com)