EBRI Issue Brief
Persistency in High-Cost Health Care Claims: “It’s Where the Spending Is, Stupid”
In the seminal paper “It’s The Prices, Stupid: Why The United States Is So Different From Other Countries,” Uwe E. Reinhardt and his co-authors concluded: “The United States spent considerably more on health care than any other country, whether measured per capita or as a percentage of GDP. At the same time, most measures of aggregate utilization such as physician visits per capita and hospital days per capita were below the OECD median…U.S. policymakers need to reflect on what Americans are getting for their greater health spending. They could conclude: It’s the prices, stupid.”
There is a corollary that applies to employer attempts to manage health care spending: “High-health-cost claimants are where the spending is, stupid.” Generally, 20 percent of the population account for 80 percent of total spending on health care services. Yet employers offer health plans that in large part look and feel the same to plan enrollees whether they are high users, moderate users, or low users of health care services even while targeting high users will have the biggest bang for the buck. Of course, high users are the most challenging population to address.
This study examines the concentration of health spending among individuals with employment-based health benefits as well as persistency in those expenditures over a five-year period. The data on use of health care services, health conditions, and spending for this study come from claims on 5.8 million policyholders and dependents with employment-based health benefits who could be followed for the entire 2013–2017 period.
- Twenty percent of the population accounted for 84 percent of total health spending, 10 percent of the population accounted for 70 percent of spending, 5 percent accounted for 56 percent of spending, and 1 percent accounted for 28 percent of spending.
- When it came to persistency in high-cost claims, 27 percent were in the top 10 percent of spending in at least one year, while 73 percent were never in the top 10 percent. Among the 27 percent who were ever in the top 10 percent, 21 percent were in the top 10 percent only one or two years, 4 percent were in the top 10 percent three or four years, and only 2 percent were in the top 10 percent each of the five years.
- The 5.8 million individuals examined in this study used $38 billion in health care in 2017. The 2 percent of the population in the top 10 percent of spending every year between 2013 and 2017 accounted for 19 percent of total spending in 2017. In contrast, the 73 percent of the population who were never in the top 10 percent of spending from 2013–2017 accounted for only 20 percent of spending in 2017.
- The characteristics of the persistently high-cost claimant group were different from the characteristics of the population never in the top 10 percent. Individuals temporarily in the top 10 percent of claimants had characteristics similar to those in the top 10 percent for all five years studied. Sixty-three percent of those persistently in the top 10 percent of claimants, as well as 59 percent of those in the top 10 percent three or four years, were ages 50–64, compared with 30 percent among those never in the top 10 percent. Persistently high-cost claimants were also much more likely to be the spouse of the policyholder. We found that 32 percent of those in the top 10 percent of claimants all five years were the spouse of the policyholder, compared with only 16 percent among those never in the top 10 percent of claimants.
- One-third of individuals persistently in the top 10 percent of claimants had diabetes. Among individuals in the top 10 percent of claimants for five years, 51 percent of those with diabetes also had hypertension, and about one-quarter of those with diabetes also had respiratory disease, back problems, and/or connective tissue disease, among other less prevalent conditions.
- Not only did individuals persistently in the top 10 percent of claimants spend more on health care than those temporarily in the top 10 percent and those never in the top 10 percent, the distribution of spending varied as well. Outpatient services, such as diagnostic services, accounted for 46 percent of total health care spending for those never in the top 10 percent. Prescription drugs accounted for 26 percent of total health care spending, and office visits to primary care physicians and specialists accounted for 18 percent. In contrast, among those in the top 10 percent for all five years, prescription drugs accounted for 52 percent of total health care spending, outpatient services accounted for 29 percent, and office visits accounted for 3 percent.
- Inpatient services accounted for 27 percent of total spending for those in the top 10 percent one or two years and 22 percent among those in the top 10 percent three or four years but only 15 percent among those in the top 10 percent in all five years. This suggests that one-time events that individuals recover from, such as knee and hip replacements, drove more of the spending for those temporarily in the top 10 percent than those persistently in the top 10 percent. Similar findings emerged for outpatient surgery and diagnostics.