Researchers find the U.S. could have saved more than $2.15 trillion on Medicare since 1980 had it employed cost-saving measures similar to Canada's
A study published in today’s Archives of Internal Medicine finds that per capita Medicare spending on the elderly has grown nearly three times faster in the United States than in Canada since 1980. (Canada’s program, which covers all Canadians, not just the elderly, is also called Medicare.) Costs grew more slowly in Canada despite a 1984 law banning co-payments and deductibles.
In the first study of its kind, Dr. David U. Himmelstein and Dr. Steffie Woolhandler, professors at the City University of New York’s School of Public Health, analyzed decades of detailed Medicare spending data for persons aged 65 and older in the U.S. and Canada.
After adjusting for inflation, the authors found U.S. Medicare spending per elderly enrollee rose 198.7 percent from 1980 through 2009. In Canada, the comparable figure was 73 percent.
According to the authors, the findings have important implications for the debate on how to save Medicare. “Had U.S. Medicare spending per elderly enrollee increased as slowly as in Canada, the savings from 1980 through 2009 would have totaled $2.156 trillion,” said Himmelstein. “That’s equivalent to more than one-sixth of the U.S. national debt.”
The new findings appear today in the Archives of Internal Medicine, a leading medical journal published by the American Medical Association. The article, which takes the form of a research letter, includes supplementary analyses based on less detailed data showing that the U.S. could have reaped even larger savings – nearly $3 trillion – from 1971 to 2009.
The article cites several reasons for Canada’s better record on cost containment: Less paperwork and administrative bloat throughout their health system (administrative costs account for 16.7 percent of total health spending vs. 31 percent in the U.S.); the use of lump-sum budgets for hospitals; stringent controls on spending for new buildings and expensive new equipment; the use of single-buyer purchasing power to rein in drug and device prices; relatively low litigation and malpractice costs; and an emphasis on primary care.
Woolhandler commented: “In a nutshell, including the elderly in a universal, nonprofit, publicly administered single-payer system has been the key to Canada’s cost control. Although U.S. Medicare is often called a single-payer system, that’s not quite accurate. It’s true that traditional Medicare is relatively efficient – only about 2 percent of its budget goes to administration, according the most recent trustees’ report, versus about 14 percent for privately run Medicare managed-care plans – but Medicare is only one of many health care payers in the United States.
“As a result,” Woolhandler said, “doctors’ and hospitals’ administrative costs are inflated by having to deal with a multitude of payers and by having to track eligibility, attribute costs and bill for individual services. This extra paperwork and bureaucracy is a major contributor to rising costs in the U.S., and these costs spill over into the relatively efficient Medicare program.
“In contrast, Canada’s single-payer system is much more streamlined and lean throughout, with big dividends for clinical care.”
The article cites several studies that show clinical outcomes in Canada are as good if not better than in the U.S.
The article notes that some U.S. politicians advocate replacing traditional Medicare with vouchers that seniors could use to buy private coverage. Still others advocate offering incentives for health providers to limit care. Yet none of these proposals have proven themselves to be effective in containing costs, the authors write.
“Canada’s road-tested cost containment methods offer an alternative,” they say.
In addition to their positions at CUNY, Himmelstein and Woolhandler are visiting professors of medicine at Harvard Medical School and co-founders of Physicians for a National Health Program. PNHP played no role in supporting their research.
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“Cost control in a parallel universe: Medicare spending in the U.S. and Canada,” David U. Himmelstein, M.D., Steffie Woolhandler, M.D., M.P.H. Archives of Internal Medicine.
