How and Why Do Countries Differ in Their Governance and Financing-related Administrative Expenditure in Health Care? An Analysis of OECD Countries by Health Care System Typology

Introduction: Administration is vital for health care. Its importance may increase as health care systems become more complex, but academic attention has remained minimal. We investigated trends in administrative expenditure across OECD countries, cross-country spending differences, spending differences between health care system typologies, and differences in the scale and scope of administrative functions across typologies.

Methods: We used OECD data, which include health system governance and financing-related administrative activities by regulators, governance bodies, and insurers (macrolevel), but exclude administrative expenditure by health care providers (mesolevel and microlevel).

Results: We find that governance and financing-related administrative spending at the macrolevel has remained stable over the last decade at slightly over 3% of total health spending. Cross-country differences range from 1.3% of health spending in Iceland to 8.3% in the United States. Voluntary private health insurance bears much higher administrative costs than compulsory schemes in all countries. Among compulsory schemes, multiple payers exhibit significantly higher administrative spending than single payers. Among single-payer schemes, those where entitlements are based on residency have significantly lower administrative spending than those with single social health insurance, albeit with a small difference.

Discussion: These differences can partially be explained because multi-payer and voluntary private health insurance schemes require additional administrative functions and enjoy less economies of scale. Studies in hospitals and primary care indicate similar differences in administrative costs across health system typologies at the mesolevel and microlevel of health care delivery, which warrants more research on total administrative costs at all the levels of health systems.