Administrative Waste in the U.S. Health Care System in 2003: The Cost to the Nation,the States,and the District of Columbia,with State-Specific Estimates of Potential Savings

Abstract

This report provides nationwide and state-specific estimates of U.S. health care administration spending and potential savings in 2003 were the United States to institute a Canadian-style national health insurance system. The United States wastes more on health care bureaucracy than it would cost to provide health care to all its uninsured. Administrative expenses will consume at least $399.4 billion of a total health expenditure of $1,660.5 billion in 2003. Streamlining administrative overhead to Canadian levels would save approximately $286.0 billion in 2003, $6,940 for each of the 41.2 million Americans who were uninsured as of 2001. This is substantially more than would be needed to provide full insurance coverage. The cost of excess health bureaucracy in individual states is equally striking. For example, Massachusetts, with 560,000 uninsured state residents, could save about $8,556 million in 2003 ($16,453 per uninsured resident of that state) if it streamlined administration to Canadian levels. New Mexico, with 373,000 uninsured, could save $1,500 million on health bureaucracy ($4,022 per uninsured resident). Only a single-payer national health insurance system could garner these massive administrative savings, allowing universal coverage without any increase in total health spending. Because incremental reforms necessarily preserve the current fragmented and duplicative payment structure, they cannot achieve significant bureaucratic savings.