Looking North: What the U.S. Can Learn From Canada to Salvage Medicare

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A new study in the Archives of Internal Medicine revealed that per capita Medicare spending is growing three times faster for seniors in the United States compared with seniors in Canada.

Canada's Medicare program shares the same name with the United States, but it covers all Canadian residents — not just those 65 and older. For the study, David Himmelstein, MD, and Steffie Woolhandler, MD, professors at the City University of New York's School of Public Health, analyzed Canadian and U.S. Medicare data on people 65 and older from 1980 through 2009.

The researchers found after adjusting for inflation, U.S. Medicare spending per beneficiary rose 198.7 percent during that time span. However, Canada's per capita spending rate was significantly lower at 73 percent. Dr. Himmelstein concluded that if U.S. Medicare spending per beneficiary had increased at Canada's rate, the savings from 1980 through 2009 would have reached $2.16 trillion. "That's equivalent to more than one-sixth of the U.S. national debt," he said in a news release.

Drs. Himmelstein and Woolhandler said there are several reasons why Canada's single-payor system was more efficient when it came to cost containment: less paperwork and administrative costs, lump sum budgets for hospitals, an emphasis on primary care and using single-buyer purchasing power to lower pharmaceutical and medical device prices, among others.

They also said because U.S. Medicare is mired in a multi-payor system, it indirectly absorbs inefficiencies and administrative costs that stem from privately run Medicare managed care health plans.

"Doctors' and hospitals' administrative costs are inflated by having to deal with a multitude of payors and by having to track eligibility, attribute costs and bill for individual services," Dr. Woolhandler said. "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."

More Articles on the U.S. Healthcare System:

13 Drivers That Are Increasing U.S. Healthcare Spending

A Look From Within: Why Are U.S. Healthcare Costs so High?

Former HHS Secretary Dr. Donna Shalala: From Academia to the Healthcare Battleground

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