Concentration of Health Spending

A new Agency for Healthcare Research & Quality brief examines the concentration of health spending in 2010.   (AHRQ Brief)   As usual, it is astounding what a small part of the population accounts for such a huge percent of spending.  In 2010, 1% of people had over 21% of spending with an average annual spend of $87,570.  The top 5% had 50% of spending, with an average of $40,876.   For the under 65 population, the top 5% of spenders had 67% of all spending, with an average of $17,453.  Note that this average spending for this group is not that much more than annual health insurance costs.  Older and poorer people tend to have higher average spending.  As would be expected, chronic conditions are strongly linked to spending.  The good news for addressing high health spending is that only a few people account for so much of it; the bad news is that it is often hard to identify who these people will be in a particular year.  There are a few people whose spending persists from year, but also people whose spending jumps up for reasons that are unpredictable–the development of cancer or a serious car accident.  Even persons with chronic conditions who may have continual somewhat elevated annual levels of spending may see a year when they have a crisis which leads to a hospitalization or other expensive episode, and these are also not easily predictable.  Note also that for many “high” spenders, the annual spending isn’t that high–between $10,000 and $20,000 for example.  It is hard to justify the cost of intensive care management when the likely gain isn’t that great.  From a policy perspective, however, perhaps the most important thing to note is the 50% of the population with only 2.8% of spending and why is it so important to force them to buy insurance?  It would be a different thing to require people to save over their lifetime for health expenses they might incur as they age; savings they could use for other purposes if they got older and didn’t have high health expenses.