5% of Americans Spend 50% of Health Care Dollars
Printer-friendly versionPDF version
a a
 
Type Size: Small
The Fiscal Times
July 31, 2012

The key argument in favor of the individual health insurance mandate, which was upheld last month by the Supreme Court in a 5-4 vote, was that everyone uses health care eventually. Therefore, it is only fair that everyone pays into the insurance pool. Without a mandate, when access to affordable coverage becomes guaranteed in 2014, some people will simply wait until they get sick before buying a plan.

Chief Justice John Robert didn’t buy that logic. He became the fifth and deciding vote by declaring themandate a tax, which the government has an unquestionable right to levy. He otherwise agreed with the dissenters who said people couldn’t be compelled to buy a product – in this case insurance – simply because one day they were going to end up in a hospital bed needing coverage.

A new issue brief from the National Institute of Health Care Management adds grist to the mill of those who rebelled against the universal insurance mandate. The study showed that in 2009 half the population – fully 150 million people – spent an average of just $236 per person on health care. That was a paltry $36 billion for the entire group out of $1.3 trillion in personal health care expenditures.

Get Our FREE Newsletter

Newsletter

On the other side of the use spectrum, however, just five percent of the population – about 30 million people – spent a whopping $623 billion or about half of all personal health care expenditures. That came to nearly $41,000 per patient.

And if one looks at just the top 1 percent of health care “spenders” – those who were often battling life-threatening or crippling illnesses like heart disease, diabetes, cancer or dementia – they averaged over $90,000 per patient per year. These three million people accounted for over 20 percent of the total health care tab.

The study serves as a cautionary note to advocates on the left or right who think eliminating waste or giving “consumers” a greater financial stake in health care decision-making will be magic bullets for holding down rising health care costs. “We have to get a handle on who these people are and develop more cost-effective strategies to help them,” said Nancy Chockley, president of the NIHCM, which receives most of its funding from various Blue Cross Blue Shield insurance organizations. “Long-term we have to prevent them from getting that far.”

The study showed that the vast majority of big spenders were older and often had multiple chronic conditions such as heart disease, diabetes, asthma and arthritis. Many times those conditions were associated with obesity. Though people 65 and older and eligible for Medicare made up just 13 percent of the population, they made up 40 percent of the high-spending group.

People in the workforce who were privately insured and spent big on health care also suffered disproportionately from multiple chronic conditions. A previous study cited in the report showed that just 7 percent of people in the high-spending “five percent” had no previous chronic condition, in other words, they were stricken without warning by cancer or suffered a bad accident.

 “If you look at what’s driving the growth in health care spending, half is due to the increase in chronic health conditions,” said Ken Thorpe, a professor of preventive medicine at Emory University and chairman of the corporate-backed Partnership to Fight Chronic Disease. “Prevention is crucial to holding down costs long-term.”

Thorpe’s group is promoting strategies like the Diabetes Prevention Program, which has been shown to reduce the number of people who matriculate into the high-cost category. The counseling and exercise program, which has been successfully tested at a handful of YMCA’s across the country, reduced the number of pre-diabetics, who were overweight with elevated blood sugar, who developed full-blown diabetes by 58 percent. “We have evidence-based programs that works if we could just build them out,” he said.

Yet prevention strategies will do little in the short-run to bend the cost curve down. People in the high-spending category, whenever they arrive there, are likely to remain there for the rest of their lives.

The insurance company-backed NIHCM’s takeaway from the study was that the new state exchanges set up under health care reform either must take steps to guarantee that high-cost patients are evenly distributed among competing plans or must “risk adjust” the size of payments to insurers. “If you’re an organization with a great reputation for treating diabetics, guess who you’re going to get? Lots of diabetics,” Shockley said. “There has to be adequate risk adjustment.”

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.