$27.6 Billion Per Year: Savings That Could Be Achieved From Single-Payer’s Administrative Simplifications

American doctors spend “nearly four times as much per physician as doctors in Ontario dealing with health insurers and payers,” and the additional time and labor drive U.S. per-physician costs to $82,975 annually versus $22,205 in Ontario, a new study published this morning in Health Affairs concludes. Most of Canada’s savings can be attributed to its single-payer system, one of the study’s authors Dante Morra told me, noting that American physicians have to incur substantial time and staff hours “interacting with multiple insurance plans about claims, coverage, and billing for patient care and prescription drugs.”

In fact, if U.S. physicians had administrative costs similar to those of Ontario physicians, the total savings would be approximately $27.6 billion per year. Just look at the difference in how American and Canadian doctors spend their time:

Morra told me that the study’s $27.6 billion in administrative efficiencies only reflects the savings attained from office physicians and does not include the potential cost reductions if other providers — like hospitals and physicians working in hospitals — spent less time processing claims for multiple payers. The real problem here is that a lot of this is out of reach. The United States isn’t moving toward a single-payer system any time soon, and while the President’s Affordable Care Act provides the Secretary of Health and Human Services with some discretion to simplify interactions between providers and health plans, any real long-term savings would have to come from the delivery and payment reforms that are still in the very early stages of development.

We’re still far-off from realizing any part of that $27 billion in savings, but Morra did mention one payment model that could achieve the efficiencies of Ontario’s single-payer system — all-payer rate setting. Under that structure, insurers can negotiate with providers for a single price for their services, thus saving providers the trouble of dealing with every single payer individually.