A new paper from the American Health Policy Institute covers the well-worn topic of high-cost patients and what, if anything, can be done to address their impact on national health spending. (AHPI Paper) In the commercial population, based on a survey of 26 large employers, the authors found that 1.2% of members are considered high cost (over $50,000), with average annual spending of over $122,000, or 31% of the total. Their average annual spending was 30 times more than that of the overall average per member. Interestingly, only 53% of the spending on these high-cost members is for chronic conditions, with the costliest conditions being cancer, heart disease, early or complicated births and blood infections. The researchers also looked at 2013 Medicare FFS data and found that 3.4% of beneficiaries accounted for 44% of spending, with an average cost of $105,000. For this group the most expensive conditions were ESRD, acute respiratory failure and congestive heart failure. Medicaid shows a similar pattern of a lot of spending dedicated to just a few individuals. The authors state that given the impending (if not already here) health spending crunch on governments, companies and individuals; it could be useful to see if it is possible to reduce either the number of high-cost members or significantly reduce spending on them.
The researchers then list a familiar litany of possible solutions to reduce health spending by focussing on these high-cost patients. Trying to predict who they will be and manage their care proactively; identifying chronic condition patients and using disease management programs; wellness to keep people healthy; more patient engagement; better primary care models. Maybe all these will have an impact, but so far it isn’t clear how much spending is reduced by them. One item the authors underplay is the role of unit price in spending. While high-cost individuals don’t pay a different price, the underlying issue in US health spending is unit cost, much more so than inappropriate utilization, in my opinion. Reducing health spending by reducing unit prices definitely works–you can see that by comparing the difference in spending on an average high-cost commercial member versus a Medicare beneficiary. The other approaches have value in many ways–they can improve health and health outcomes and quality of care, but relying on them alone to reduce spending seems unlikely to get us where we need to be–health spending increasing slower than GDP. And we have noted before the difficulty in reducing spending on high-cost patients; a lot of them can’t be predicted, there isn’t high persistence in spending from time period to time period and there isn’t always much you can do to limit acute episodes for chronic disease sufferers. A substantial across the board effort to reduce unit prices would be much more useful.
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I would add, that it is imperative to be assured that what you are paying for is not fraudulent, wasteful, or abusive. Too often, there is a reliance that the bill is correct. When there is plenty of evidence that FW&A is rampant and unchecked. Self funded groups especially should be leery, as they relie on the administrator to monitor FW&A, when in fact the ASO could care less because they have no risk for overpayment.