It is well known that across the US population a few people account for a huge proportion all spending. This tends to be true for all payer types, including employer-sponsored health plans. A brief from the Employee Benefits Research Institute examines the issue, using data from 2022 covering 13 million enrollees. The spread in spending is dramatic, but not as high or as extreme as in an older population, such as Medicare beneficiaries. (EBRI Brief)
The top 1% of spenders account for 29% of all health spending, with an average $206,000 in the year and a floor of $96,000. The top 5% account for 57% of all spending, with an average of $81,000 and a floor of $29,000. And the the top 20% accounted for 84% of spending, an average of $30,000 a year but a floor of only $6,000. This means the rest of the population, 80%, has only 16% of all health care spending. Tell me again why everyone has to have health insurance?
As you would expect, much of the high spending is driven by people who have chronic health conditions and acute flare-ups of those conditions. Cancer, which increasingly is a chronic condition as new treatments keep people alive but don’t completely eliminate the cancer, is the cause of the single highest spending, followed closely by stroke and its consequences. Kidney disease and pneumonia also cause significant spending, although I don’t see why pneumonia is treated as a chronic condition.
Not presented here, but as or more important to understand is the persistence of a particular person in the high spending category. Someone who has a serious accident with an extended hospitalization may have a one year event of large medical expenses but thereafter return to a low spending status. Other conditions, like heart failure or chronic kidney disease, may entail high spending year after year. Programs intended to provide intensive management of patients’ care work best when the person is a persistent high spender.
As I noted above, everytime I look at these figures on the concentration of health spending, I wonder why we insist that everyone needs health insurance. Health insurance incurs significant administration and profit expense and imposes administrative and regulatory costs on providers. It has long been understood that the presence of a third-party payer tends to increase inappropriate utilization and lead providers to do more and charge more. I understand there is some risk that in any given year any of us could incur high expenses, but there are ways to address that as well. We need a serious debate on whether current mandated health insurance forms are the best method to address paying for health care.
