Healthcare Spending: Administrative Costs out of Control

September 27, 2014
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Healthcare SpendingWhen we talk about healthcare spending being “out of control” does anyone ever say why?

Healthcare SpendingWhen we talk about healthcare spending being “out of control” does anyone ever say why? The Commonwealth Fund  survey breaks down the costs of healthcare administration – which make up a quarter of all healthcare spending in the U.S.

  • When you look at other developed nation’s healthcare systems, the administrative costs in those countries are well under the 25% mark. England boasts just 16% of spending on administration, and they have nationalized healthcare.
  • In the United States, annual spending per person tops $667 – which is nearly double the next highest country (The Netherlands, which comes in at just $323).
  • If we lowered our spending to match The Netherlands, we’d save $107 million dollars in the first year.

Other findings from The Commonwealth Fund’s survey revealed that, as you might predict, rural hospitals had lower administrative costs as did teaching hospitals, while for-profit hospitals ranked the highest in terms of spending.

A specific reason for the increased administrative costs in the U.S. in relation to other nations is the complexity of our billing system – because there are multiple payers, more staff is needed to process the billing procedures. In countries with single-payers, there’s simply less work to be done – so, less people need to be paid.

In another study, the projected spending for the US if these trends continues is expected to top $315 billion by 2018- and, in terms of assessing care quality, accessibility and patient satisfaction, studies are consistently showing that just because you’re spending more money doesn’t mean the quality of care is high, too. It’s ironic that so much time, effort and money is involved in making sure that doctors get paid – the topic of physician compensation, too, is a complex one.

So, the challenge of balancing adequately compensating physicians, taking good care of our patients, and reducing administrative costs continues to inform the direction of U.S. Healthcare.