I love health policy and research so on Valentine’s Day, it is fitting that I do a post on one of my favorite topics–on which patients do most of our health care dollars go to and for how long? This study looks at that question in commercial health plans. As has other research, it finds a very concentrated amount of spending among a few patients. (JMCP Article)
The top 1% of patients accounted for 27.6% of total spending; the top 5% for 55% and the top 10% for almost 70% of all health care spending. The top 1% had spending of almost $150,000 on average for the year. The top 10% had average annual costs of $35,725. At the other end, the bottom 50% in spending accounted for only 4% of all spending. These people represented average spending of $474 per year. Among other things, you see the enormous subsidization that the people at the bottom are doing of people at the top. The high spending tends to exist in all categories–inpatient, outpatient and drugs. Inpatient is the most concentrated in a few people because it isn’t used that frequently and each episode is high cost, but drugs are catching up because of specialty drugs.
So what lessons do I take from this? One is that there is no point in all these population-based care and disease management programs, especially all the worthless digital crap being done these days. There are two few people to make it worth the cost. Wellness efforts may make sense if they keep people from progressing on the disease spectrum but the research doesn’t actually show that. That top 5% is pretty identifiable and tends to persist year-after-year, so they can be targeted for cost minimization, but they are going to cost a lot no matter what.
The other point is that employment-based or broad-based insurance is a huge waste of money, especially in administration and profit. The bottom 50% or even 75% would be far better off to just pay out of pocket, with a catastrophic backup. For the high-cost group what makes the most sense is probably to have a government program that auctions off the care of these people to a plan or care manager. A flat amount would be paid for the ongoing health care needs and the manager would contract with providers and take other steps to maximize quality and minimize costs. I think this approach would end up saving a huge amount of money, which would allow higher wage increases from employers and lower taxes for the populace.