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Concentration of Health Spending, Part II

By October 21, 2014Commentary

Our summary of the AHRQ Statistical Briefs (link in yesterday’s post) continues with an examination of factors related to concentration of spending and discussion of out-of-pocket spending.  The concentration of health spending varies by age group.  As might be expected, the elderly over 65 have more dispersed spending, as many people in this age category have at least some health issues.  For example, the top 5% of 65 and older people represents 34% of all spending for this group, compared to 47% for the 45-64 cohort, 52% for the 18-44 group and 54% for children.  The average spending in the top 5% groups steps up rapidly with age after childhood; it is $27,754 for 18-44 year-olds, $57,030 for 45 to 64s, and $63,800 for 65 plus.  By race, non-hispanic whites in the highest 5% of their race accounted for 55% of total spending,  the top 5% of African-Americans for 55%, the top 5% of Asians for 61% and the top 5% of Hispanics for 62%.  The highest 5% of males represented 56% of spending but the top 5% of females for only 44%. For people with four or more chronic conditions, the highest 5% only accounted for 30% of total spending, compared to 49% for the top 5% with only one chronic condition.  The annual mean for the four of more chronic condition group was $78,000, so it is a subset to focus on for care management.  Finally, income showed less effect on dispersion of spending, with the highest income group at 45% of all spending represented by the top 5% and the lowest income group at 54%.

Consumers are likely more interested in their out-of-pocket spending and a separate brief addressed concentration in out-of-pocket spending.  (Please note that although out-of-pocket spending is not defined, it does not appear to include share of premium, since only actual service expenditures are discussed.  There is an inverse relationship between size of premium, and therefore usually premium cost-share, and out-of-pocket spending.)  Overall, 14% of health spending is out-of-pocket.  About 7% of the population, 22.5 million people, had direct pay expenses of $2,000 or more, and .4% or 1.3 million people incurred out-of-pocket expense of $10,000 or more.  By service category, 4% of hospital costs, 12.3% of ambulatory care and 19% of drug expenses were paid directly by patients.  The top 1% ranked by out-of-pocket spending accounted for 20.5% of total direct spending, while the top 5% represented 45%.  The lowest 50% accounted for only 2.2%.  In general, the older cohorts had more out-of-pocket expenses and more dispersion of that spending.



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