“Administrative expenditures are often seen as the first target areas when implementing austerity measures. The common view is that excessive bureaucracy and “red tape” are burdensome (Morra et al., 2011; Cutler et al., 2012). Comparing how countries differ in the way they administer their health care system can serve well in identifying policy pointers. But simple international comparisons of the level of spending on administration can be misleading, since such comparisons reflect differences in governance and financing structures of health care, and only illustrate the costs, not the potential benefits of administrative expenditures.
“It needs to be stressed that administration per se should not be seen as ‘bad’. Paying for performance, for instance, can be expected to generate a higher administrative burden for providers and payers as it typically involves the reporting and analysis of additional data for a substantial number of indicators of health care quality (OECD and WHO, 2014). In the same manner, HTA [Health Technology Assessment] generates costs but promotes more informed decisions on coverage of new and current services. Likewise, elaborate follow-up of clinical recommendation adherence by inspectorates is not free of cost but might improve clinical practice. What is important is to balance out the costs of administrative activities against their potential benefits, which are difficult to measure.”
Source: OECD (2017), Tackling Wasteful Spending on Health, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264266414-en
https://www.oecd.org/health/tackling-wasteful-spending-on-health-9789264266414-en.htm
“The high cost of administration is often cited as one of the main disadvantages of (multi-payer) insurance-based, public health financing compared with health care systems where coverage is based on residency and that are mainly financed through taxes (Saltman et al., 2004). Figure 6.3 shows that those systems with a more predominant SHI scheme tend to have higher administrative costs. On average, in countries where social security spending constitutes less than 40% of public health expenditure, administrative costs accounted for less than 2% of public spending on health in 2014, whereas it was more than double that in countries where social security funds accounted for the bulk of public health spending.
“Interestingly, while administrative costs appear similar for systems with residence-based entitlements, a much larger spread occurs across insurance-based health care systems. Ultimately, this variation reflects the number of different funding pools and the presence of competition, ranging from single-payer to multi-payer systems either with automatic affiliation or with a choice of insurers. Generally, countries with a single SHI [Social Health Insurance] fund (e.g. Hungary, Poland and Slovenia) show lower levels of administrative spending; indeed, levels are similar to those seen in health care systems with residence-based entitlement, such as Australia and Denmark.
“While administrative costs are higher in multi-payer systems, the distinction between those with choice and those with automatic affiliation is less clear-cut. For example, in the Czech Republic, Germany and the Netherlands, people can choose between competing insurers; the resulting administrative costs range from 3.3% of public health spending in the Czech Republic to more than 5% in Germany. In Austria, Belgium, France and Japan, multiple insurance funds also exist, but affiliation with a specific insurer is generally linked to a profession and not a matter of individual choice. While Austria and particularly Japan report administrative cost levels below those in countries where insurers do compete, Belgium and France have government administrative costs at a similar level. The United States and Mexico have notably higher government administrative costs – pointing to other inherent organisational and cultural factors. The litigious environment, but also scrutiny from regulatory bodies and efforts devoted to utilisation management and quality improvement, may partially explain why administrative costs in the United States are so high (Kahn et al., 2005). In Mexico, distinct health financing systems exist for different sections of the population, creating many administrative duplications (OECD, 2016).”
Source: OECD (2017), Tackling Wasteful Spending on Health, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264266414-en
https://www.oecd.org/health/tackling-wasteful-spending-on-health-9789264266414-en.htm
“A significant share of health spending in OECD countries is at best ineffective and at worst, wasteful. One in ten patients is adversely affected during treatment by preventable errors, and more than 10% of hospital expenditure is allocated to correcting such harm. Many more patients receive unnecessary or low-value care. A sizable proportion of emergency hospital admissions could have been equally well addressed or better treated in a primary care setting or even managed by patients themselves, with appropriate education. Large cross-country variations in antibiotic prescriptions reveal excessive consumption, leading to wasted financial resources and contributing to the development of antimicrobial resistance. The potential for generic medicines remains underexploited. Finally, a number of administrative processes add no value, and money is lost to fraud and corruption. Overall, existing estimates suggest that one-fifth of health spending could be channelled towards better use.”
Source: OECD (2019), Health at a Glance 2019: OECD Indicators, OECD Publishing, Paris, https://doi.org/10.1787/4dd50c09-en.
https://www.oecd.org/health/health-systems/health-at-a-glance-19991312.htm
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Page last updated May 26, 2020 by Doug McVay, Senior Policy Analyst.
