Given the wide gap between average spending for chronic conditions and the average employee, understanding and managing such costs is a vital part of improving the U.S. health care system. (Photo: Shutterstock)
A recent Kaiser Family Foundation (KFF) study puts new numbers on the old axiom that a relatively small amount of people account for a high percentage of health care spending. The KFF analysis focused on health care costs for people enrolled in employer-based plans of large companies over a three-year period; from 2015 to 2018.
For people in these large employer plans, 1.3 percent of enrollees accounted for 19.5 percent of overall health spending in 2017, the study found. The report said that people in the top five percent of spending in each of the three years from 2015 to 2017 had average health spending of $87,870 in 2017. That compared to average per-person spending of $5,870 among all large group enrollees during that period.
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“People with high health care spending are not a homogeneous group: some have very high spending during a short spell of illness, while others have ongoing high spending due to one or more chronic illnesses,” the report said. “The patterns and types of medical spending also vary among these high-need patients: for example, those with acute spells of illness are more likely to have high hospital spending while those with chronic illnesses spend more on outpatient services and prescriptions.”
Noting the wide gap between average spending for these with these costly conditions and the average employee, the report said understanding and managing such costs is a vital part of improving the U.S. health care system. “The predictability and extent of [this group's] spending suggests that any efforts to reduce the total costs of care and improve health system quality must focus heavily on this group of people.”
Identifying the conditions associated with high spending
People who develop any serious health problem can increase health care spending—for example, the study looked at those who had high health spending just for one year (2017) and found their average costs were $55,670—nearly 10 times higher than the $5,870 yearly health care spending for all covered enrollees on average.
But the $87,870 spent in 2017 for members with persistently high costs over time represents by far the biggest price tag for payers. Just a handful of conditions account for the bulk of this spending: HIV infection, cystic fibrosis, and multiple sclerosis are the conditions most clearly associated with high spending over multiple years.
“The odds of having persistently high spending were about 259 times higher for a person with HIV as compared to a person without HIV, all else being equal. Cystic fibrosis and multiple sclerosis increased the odds of having persistently high spending 243 times and 206 times respectively,” the KFF report said. “While these three conditions had the biggest impacts on the odds, having any of several other illnesses or conditions, such as regional enteritis and ulcerative colitis, rheumatoid arthritis, leukemia and multiple myeloma, also greatly increased the odds of having persistently high spending.”
Prescription drugs = much higher costs for some members
Not surprisingly, those with just one year of high costs tended to have high inpatient costs; those with longer-term conditions spent more on outpatient care and on prescription drugs, the study shows. For example, the research found those in the higher-spending-over-time category spent 40 percent more on outpatient spending than those with just one year of high spending.
The KFF study found that the average drug spend in 2017 for all employees was $1,290. For those with high spending just in that year, the average drug spend was $5,110. For the enrollees with persistently high spending, the 2017 drug spend averaged $34,120.
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