There are several ways to look at the distribution of health care spending in the United States — for example, by payment type, by provider type or by what condition is being treated. One of the most revealing analyses is which persons the money is spent on.
For a number of years a unit in the federal government called the Agency for Healthcare Research and Quality has put out a brief on the concentration of health care spending among patients. The most recent version, covering 2021, has just been released. As with all of health care, this analysis was impacted by the coronavirus epidemic, likely raising total spending. (Stat. Brief)
The level of concentration is truly staggering. Total expenditures for patient health care in 2021 were $2.3 trillion, an astounding amount in itself. Just 1% of the population accounts for 24% of all health care spending, an average of $167,000 for that year, and a minimum of $87,000. The top 5% of spenders represented over 50% of total spending, at an average of $71,000. At the other end, the bottom 50% of the population in spending accounted for less than 3% of expenditures. This bottom 50% spent only $1,374 or less on health care in that year, and a minuscule average of $385.
As you can imagine, persons over age 65 were most likely to be in the top spending group, as were persons who had severe chronic disease, particularly heart or orthopedic conditions. About 26% of costs for the top 5% cohort were for hospital care. Three-quarters of this health care for the top 5% was paid for by Medicare or private insurance. While this brief does not specifically address the issue, other research has shown that the same people often persist as high-cost patients. Some obviously die, and others had one-time events, like a very serious car or work accident or an acute cancer episode that is resolved. But most have ongoing expensive-to-treat diseases, such as dementia or heart failure.
Analyses of health spending concentration are a useful guide to public and health management policy. From my perspective, the analyses call into question the whole notion of ensuring that everyone has health insurance. Health insurance involves relatively large administrative costs for both the insurer and providers and encourages excessive utilization. When 50% of the population has almost no annual health spending, why should those people be forced to purchase health insurance? It would seem to make as much sense to have people pay directly for most of their health care and to have a public or other fund that covers catastrophic events.
Analyses of concentration of spending in specific populations can also help with efforts to better manage health and health care. Those who are high spenders can be identified and assistance given to ensure that they receive appropriate care, at a reasonable price, and that they are incented to engage in healthy behaviors. Avoiding hospitalizations is especially key to reducing spending, so sticking to a regimen of routine visits for chronic disease care is important. Smoking, excessive drug and alcohol use, poor diets and lack of exercise are all tied to poor health and high health spending. Individuals should be incentivized and penalized for not changing those behaviors, otherwise they are in essence forcing others to pay for their irresponsible behaviors. No excuses should be accepted.
Kevin Roche runs The Healthy Skeptic, a website about the health care system, and has many years of experience working in the health care industry. If you have health care-related questions, you can contact Kevin at xuebpur@urnygul-fxrcgvp.pbz and he may answer the question in a column.
Read more from Kevin Roche at his website: healthy-skeptic.com
Kevin Roche
Kevin Roche runs The Healthy Skeptic, a website about the health care system, and has many years of experience working in the health care industry.
