Spending by Condition

By March 10, 2020 Commentary

A group of researchers at the Bureau of Economic Analysis have for some time been working on approaching trends in health spending by focusing on what it costs to treat various conditions and how that is changing over time.  Some of their latest work is published in the Journal of the American Medical Association.   (JAMA Article)   The authors looked at these spending trends by three major payer types:  public programs, private insurance and out-of-pocket spending.  Data from 1996 to 2016 was used.  The population was divided in 38 age and sex groups and 154 health conditions were used as the basis for spending analysis.  At a high level, spending rose from $1.4 trillion in 1996 to $3.1 trillion in 2016.  In 2016, private insurance paid for 48% of total spending, public programs for 42.6% and out-of-pocket costs for 9.4%.  After adjusting for population growth and aging, the annualized growth rate was 2.6% for private insurance, 2.9% for public insurance and 1.1% for out-of-pocket spending.  Among macro-categories of spending, musculoskeletal disorders ranked first, accounting for $381 billion in spending in 2016.  About 54% of these costs were borne by private insurers and 49% was for ambulatory care.  Second were diabetes, urogenital, blood and endocrine disorders, at $309 billion; third was cardiovascular disease at $255 billion.  Across all categories government administration and net cost of private insurance was about 9.8% (remember that when you see these absurd estimates about administrative costs).

Inpatient spending was a major component, 49%, of spending for cardiovascular disease, and 55% for communicable diseases.  Drugs were notably significant for diabetes, etc. at 25.7%, mental health, 20.2% and respiratory disease at 26%.  Nursing facility spending was 39% for neurological disorders, which includes dementias.  At a more micro condition level, back and neck pain was the single highest of the 154 conditions, with $134.5 billion in spending in 2016.  57% of that was paid by private insurance, 33.7% by public insurance and 9.2% out-of-pocket.  Among other notable conditions, diabetes cost $111.2 billion, ischemic heart disease $89.3 billion, falls $87.4 billion, dementias $79 billion and hypertension $79 billion.  Across the top ten individual health conditions, dementias had the highest out-of-pocket spending, primarily because nursing home care can involve a fair amount of private pay.  For public insurance, the top spending conditions were diabetes, $55.4 billion; ischemic heart disease, $48.2 billion and musculoskeletal at $46.9 billion.  For private insurance, as noted above, neck and back pain was number one, other musculoskeletal number two and pregnancy third.  Dental care was the highest condition for out-of-pocket spending at $30.5 billion, with dementias second at $19.4 billion.  For public insurance spending over the study period rose fastest for rheumatoid arthritis, hyperlipidemia and multiple sclerosis.  For private insurance the fastest growing conditions were HIV, maternity complications and multiple sclerosis.  For out-of-pocket spending the fastest growth was recorded by anemias, lymphoma and rheumatoid arthritis.  For almost all of these, drug spending plays a major role.  Out of the 154 conditions, after adjusting for population growth and aging, 108 had increases in spending over the study period.

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