Study reveals a $600 billion savings in administrative costs with Medicare for ALL

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The US spent $817 billion on healthcare administrative costs in 2017, $600 billion more than Canada, which has a smaller population than the US but also has much lower per capita healthcare costs: For example, the US spends an average of $2,479 per patient on admin costs, compared with $551 per capita under Canada's single-payer system, according to a new study published in the Annals of Internal Medicine.

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Researchers conclude that this cost discrepancy is primarily the result of bureaucratic hoops US healthcare providers must jump through to fulfill complex billing arrangements — a defining feature of the US' fractured private health insurance system: An increase in overhead from private insurers caused spending as a percentage of total US healthcare costs to surge from 31% in 1999 to over 34% in 2017, which equates to an added $100 billion burden each year over that same period. 

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The US' sky-high healthcare costs are driven in no small part by the oversized admin spending burden private insurance places on hospitals and other providers — and these costs could have negative implications on patient health.

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Nearly half of all US health spending is tied to admin management, per a 2018 JAMA report — and the cost burdens associated with private insurance are being passed along to US consumers, making treatment an unmanageable expense. Patients are coughing up large portions of their budget on health, with the average nonelderly US family spending $8,200 per year on healthcare — or 11% of their income.

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And when we consider that 67% of all US bankruptcies are due to exorbitant healthcare costs, according to a 2019 study from the American Journal of Public Health, it's critical to recognize that the admin burden from private insurers — contributing to a rise in overall healthcare spending by US patients — is at least partially to blame for why health costs have become so unmanageable for so many people.

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And anxieties around the possibility of medically induced poverty are driving poor health habits among US consumers. In a recent Gallup poll, 25% of US consumers said they or a family member had delayed treatment for a serious illness because of the high cost of care.

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Such risky behavior could easily result in a negative feedback loop, whereby patients with otherwise treatable conditions develop worse, more complicated ailments simply due to a lack of financial resources — which is counter-productive to the social determinants of health (SDOH) initiatives we've seen from many of the US' largest private health insurers: Large payers have spent millions on solutions for nonclinical SDOH issues like transportation access, housing insecurity, and social isolation that account for 80% of patient health outcomes.

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I (Zach) believe a shift toward a single-payer Medicare For All system in US healthcare could be a potential balm to the system's current admin cost crisis. And I'm not the only one who recognizes that the US' private insurance system may no longer be sustainable: CEO of insurtech Bind Tony Miller said on a 2019 Health 2.0 panel that, "They see disruption coming, and I think that 'Medicare for All' is evidence that, as a society, we're at a point where this has got to get better or we need a reset."

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Such consumer frustration with the cost and complexity of the US health insurance system is evident in the early polling and fundraising success of Vermont senator and Democratic presidential frontrunner, Bernie Sanders, who counts Medicare For All as a central pillar of his campaign platform.

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