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Persistence of Health Spending

By December 9, 2015Commentary

Where is all our health spending going?  One answer is; on just a small percent of our population.  Is this the same group year after year?  The answer to that appears to be no, as revealed in yet another Agency for Healthcare Research & Quality Statistical Brief.   (Stat. Brief)   The brief tracked persistence in a spending group from 2012 to 2013 using MEPS survey data.  In 2012 the top 1% of spenders, average cost of $97,956, accounted for 22.7% of all health expenditures, while in 2013 the top 1% represented 21.5% of spending at an average of $95,200.  But only 14% of those in the top 1% retained that status in 2013.  Lets go to the other extreme, the bottom half of the population ranked by spending accounted for only 2.7% of all health spending in 2012 and 73% retained that ranking in 2013.  In 2012 this group averaged $253 in spending–now tell me again why half of our population needs extensive health insurance?  The top 1% likely justifies intensive management, but as I have pointed out before, that assumes that they would be high cost in the future.  How far down do you need to go to be likely to get a return on investment?  The top 10% of spenders accounted for 66% of all spending in 2012, an average of $28,468, and 43% kept their status in this decile in 2013.  Is that enough spending to get a payback on care management?  Are there factors that might help us better anticipate who will stay in the high spending decile from one year to the next?  Older people, women, non-hispanic whites fall into this group, as do people who report being in poorer health, which seems obvious.  What would be very helpful here is an intensive study based on diagnosis codes.  You would strongly suspect that you would find that many people who stay in the top decile have multiple chronic conditions, in particular, various forms of dementia, and that many who are only high-spending for one year had some acute episode–a serious accident or a cancer which was treated or from which they died, although cancer is becoming more of a chronic disease.

To which bucket do the top 10% from one year who don’t stay in that category go?  The brief says 28% went to a category ranking in the lower 75% of spending.  That means that the remaining 29% ended up being still relatively high-spenders.  (the 43% who keep top 10% status plus 28% going to a low spending group equals 71% so 29% must have gone into the in-between area.)  More graphs in the brief showing to which bucket people went from year-to-year would help.  It seems that most people who are relatively high-spenders stay generally in that area.  One interesting observation that deserves further study is the extensive number of uninsured people who have very low health spending and the relatively small number of high-spenders who are uninsured.  Are people spending less because they are uninsured or do people who have little need for health services avoid getting insurance?  Inconsistent answers have been given to this question by previous research.  And it is clear from looking at this brief that we are approaching the whole problem of health insurance in the wrong way.  At least half and probably two-thirds of our population has no need for extensive health insurance coverage, yet we are now mandating that they all have it.  We would be far better, and fairer, to let most people buy a purely catastrophic coverage that covers all expenses over say $1000.

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