Reducing Bureaucratic Waste Would Save $140 Billion Annually

“The fiscal case for NHI arises from the observation that bureaucracy now consumes nearly 30% of our health care budget,57 as well as the fact that this enormous bureaucratic burden is a peculiarly American phenomenon. Our biggest HMOs keep 20%, even 25%, of premiums for their overhead and profit8; Canada’s NHI has 1% overhead,2 and even US Medicare takes less than 4%.9 HMOs also inflict mountains of paperwork on clinicians and institutional providers. The average US hospital spends one quarter of its budget on billing and administration, nearly twice the average in Canada.7 American physicians spend far more time and money on paperwork and billing than their Canadian colleagues.5 Administration consumes 35% of home care agency budgets in the United States, as opposed to 15.8% in Ontario (S. Woolhandler, T. Campbell, D. U. Himmelstein, unpublished data, 1999–2000).

Reducing our bureaucratic spending to Canadian levels would save at least $140 billion annually, enough to fully cover the uninsured and upgrade coverage among those now underinsured. Proponents of NHI,10 disinterested civil servants,11,12 and even skeptics13 all agree on this point. NHI would require new taxes, but these taxes would be fully offset by a fall in insurance premiums and out-of-pocket costs. Moreover, the additional tax burden would be smaller than is usually appreciated, because nearly 60% of health spending is already tax supported14 (vs roughly 70% in Canada).”

David U. Himmelstein, MD; Steffie Woolhandler, MD, MPH, “National Health Insurance or Incremental Reform: Aim High, or at Our Feet?,” American Journal of Public Health 98, no. Supplement_1 (September 1, 2008): pp. S65-S68.

https://ajph.aphapublications.org/doi/full/10.2105/AJPH.98.Supplement_1.S65

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