Health Care Cost Allocation

In a recent AHRQ study there is an analysis of the distribution of health care costs. It is instructive. Two major conclusions are of merit:

In 2010, the top 1 percent ranked by their health care expenses accounted for 21.4 percent of total health care expenditures with an annual mean expenditure of $87,570. Overall, the top 50 percent of the population ranked by their expenditures accounted for 97.2 percent of overall health care expenditures while the lower 50 percent accounted for only 2.8 percent of the total.

The top 5 percent of individuals with four or more chronic conditions accounted for 29.7 percent of health care expenditures for this subpopulation with an annual mean of $81,790. Based on chronic condition status, persons with four or more chronic conditions had the lowest concentrated levels of health care expenditures and the highest annual mean expenses at the top quantiles of the expenditure distribution.

 Let us consider the total costs as shown below:

Note the high level of the highest users, over $80,000 per year. The average is well below a tenth of that number.

Then by age we have the above expenditures. As would be expected the oldest dominate the amount in the top 5% level. The younger are less than a fourth of the older. This ratio holds throughout.

Finally we have the percentages above.

The conclusion is simply that a small percentage are the dominant users. Similar results are the same in many insurance claims. The question is; can we find ways to reduce the costs of this higher group or is this the nature of the problem?