High staffing costs may contribute almost as much to the gap between U.S. and Canadian health spending levels as high administrative costs do.
Alexis Pozen, a health policy analyst at the University of California at Berkeley, and
David Cutler, an economist at Harvard University, have analyzed factors contributing to the gap in a paper published in Inquiry, an academic journal backed by Excellus Health Plan Inc., Rochester, N.Y.
The researchers looked at data for 2002, the most recent year for which the researchers found data that was easy to compare. In 2007, Canada spent $3,895 on health care per person and the United States spent $7,290. In 2002, Canada spent $1,281 and the United States spent $2,870.
The researchers looked at the incomes of physicians, members of the clinical staff who are not physicians, and members of hospitals’ and physicians non-medical support staffs. The researchers also looked at spending on administration and differences in the amount and intensity of care provided.
The researchers found that differences in health care sector earnings accounted for about $490, or 31%, of the $1,589 gap between U.S. and Canadian spending in 2002.
The United States had 19% more physicians per 1,000 residents, 24% more clinical staffers and 44% more support staffers than Canada, and the health care sector workers in the United States were higher paid. The gap was 13% for clinical staffers, 27% for non-clinical staffers, 37% for primary care doctors and 53% for specialists.
The amount of spending on non-clinical staffers, the time physicians devote to administrative duties, and non-staff expenditures accounted for $616, or 39%, of the gap
between U.S. and Canadian health care spending. The researchers found, for example, that U.S. physicians spend 59% more time on administrative duties than Canadian physicians do, and that U.S. hospitals spend 76% more on non-staff spending per capita.
Differences between the type and level of care provided appeared to account for just $224, or 14%, of the gap between U.S. and Canadian health care costs, the researchers report.
The researchers note that they may have underestimated some costs and overestimated others.
“Further, defining administration is crucial to separating wasteful spending from non-wasteful spending,” the researchers say.
“Non-staff” spending on working with many different insurers may be avoidable, but non-staff spending resulting from differences in office rents and equipment costs may be difficult to avoid, the researchers say.
“Data from the United States showed that malpractice insurance, office space, and utilities were the largest components of administrative spending,” the researchers say. “Equipment rental and maintenance were somewhat less important, and automobiles, continuing medical education and laboratory expenses were relatively low.”
The Canadian non-staff expenditures were broken out in a different way and could not be compared to the U.S. figures, the researchers say.
The researchers do not look at how the gap between U.S. and Canadian health care costs has changed over time. In 2007, for example, health care cost researchers found that costs were much higher in the United States than in other developed countries, but largely because of increases that took place from 1980 to 1990. From 1990 to 2003, the overall rate of increase in U.S. health care spending was about the same as in other developed countries.
CORRECTION: An earlier version of this article gave incorrect per-capita health care spending figures for Canada and the United States.