Health-care business writer Merrill Goozner recently analyzed a report from the National Institute for Health Care Management (NIHCM). It showed that in 2009, half the U.S. population (150 million people) spent an average of $236 per person on health care, or $36 billion of the $1.3 trillion in personal health-care expenditures.
Only 5 percent of the population (about 15 million people) spent about half of all personal health-care dollars ($623 billion). That’s about $41,000 per patient. The top 1 percent of health-care spenders (usually people battling life-threatening or chronic illnesses such as heart disease, diabetes, cancer or dementia) average more than $90,000 per patient per year. These 3 million people represent more than 20 percent of the total U.S. health-care tab.
Goozner makes the point that “eliminating waste” and giving “consumers a greater financial stake” in health-care decisions are reasonable goals and popular political buzzwords, but they’re not the key to curbing rising health-care costs. Most people, as the NIHCM figures show, are not on a wild health-care spending spree.
The vast majority of big spenders were older and often had multiple chronic conditions (heart disease, diabetes, asthma, arthritis) that were associated with obesity. Medicare-eligible patients 65 and older composed 13 percent of the population, but represented 40 percent of the high-spending group.
Working people with private insurance and large health-care expenses also suffered disproportionately from multiple chronic conditions. A previous study cited in the NIHCM report showed that only 7 percent of people in the highest spending 5 percent had no previous chronic condition; in other words, they were stricken without warning by cancer or had a bad accident.
Like the best prescription for treating health problems, the best way to treat skyrocketing costs is to prevent them in the first place. Said Ken Thorpe, professor of preventive medicine at Emory University and chairman of the corporate-backed Partnership to Fight Chronic Disease, “If you look at what’s driving the growth in health-care spending, half is due to the increase in chronic health conditions. Prevention is crucial to holding down costs long-term.”
Thorpe’s organization promotes prevention strategies, such as a diabetes prevention program that has been shown to reduce the number of people who move into the high-cost category. But, Goozner writes, prevention strategies don’t curb costs in the short term; once someone joins the high-spending ranks, he or she probably will remain there.
The who-spends-what scenario makes implementing the Affordable Care Act — the health care reform legislation that the Supreme Court recently ruled was, with notable exceptions, constitutional — more challenging. The key argument in favor of the individual health insurance mandate is that everyone uses health care eventually. So it’s only fair that everyone pays into the insurance pool. Without a mandate, some people will wait until they get sick before buying coverage.
For the NIHCM, the new study means that the ACA’s new state insurance exchanges, which are intended to provide broader access to affordable coverage, either must guarantee that high-cost patients are evenly distributed among competing plans or must “risk adjust” the size of payments to insurers. That means if one plan covers a disproportionately large number of seriously and/or chronically ill people, it must cost more.
“If you’re an organization with a great reputation for treating diabetics, guess who you’re going to get? Lots of diabetics,” said NIHCM President Nancy Chockley. “There has to be adequate risk adjustment.”