Wednesday, June 29, 2011

5% of Americans, Hogging the Health Care Expenditures

The National Health Expenditure Accounts (NHEA) is an arm of the Health and Human Services which calculates the costs of medical expenses and projects future health care spending based on past evidence. The NHEA has published their latest data set, which ended in fiscal year 2009. According to the NHEA, health care spending (a combination of private and public monies) broke down in the following manner:

U.S. spending for health care has been on a relentless upward path – reaching $2.5 trillion in the aggregate, $8,100 per person, and 17.6 percent of GDP in 2009.

5 percent of the population responsible for almost 50 percent of all spending. At the other end, half of the population accounts for just 3 percent of spending. That raises the question of who is considered part of that 5% of high spending, and who is in the bottom half of the population who accounts for 3% of spending?
"15.6 percent of the civilian, non-institutionalized population had no health care spending at all in 2008 and the half of the population with the lowest spending accounted for only 3.1 percent of all expenditures" (NHEA).

The NHEA does not specifically name who is in the bottom half of the population; the ones who are not a part of the higher cost of health care. One thing that we can say about the bottom half of the population is that they are probably young. We know that because that was one of the indicators of those who incurred the highest costs - age matters. If you are over the age of 55 years, then your chances of being a part of "the problem" increases dramatically.
"63.6 percent of all spending was incurred by the 10 percent of the population with the highest spending. The top 5 percent of the population accounted for almost half (47.5 percent) of all spending, and the top 1 percent of the population was responsible for 20.2 percent of spending" (NHEA).
 If you are over 55-years-old, then you are at higher risk for health care expenditures, an that makes sense. What else contributed to being in the top 5%?  According to the NHEA, obesity and obesity-related conditions, such as "hypertension, diabetes and hyperlipidemia" are contributing to the 50% of all health care expenditures. That's not singling out people who are obese or people smoke, those are just the facts. How much difference is there between spending in the top 5% to those in the bottom 50%? It's pretty clear. According to the NHEA figures, spending for people at the bottom half of the expenditure scale averaged out to $733 per person. In contrast, spending per person in the top half of spending averaged
per person. That's is a 10X difference in health expenditure. But there's more.

According to the NHEA data, the top 50% averaged out to $7,000 per person, ten times more than the bottom 50% of the population. How does that spending equate to the top 10%, 5% and 1% of the population in health care expenditures then?

Average spending on the top 10% (per person in 2008): $24,000 (4X higher than the top 50%)

Average spending on the top 5% (per person in 2008) $35,000 (5X higher than the top 50%) 

Average spending on the top 1% (per person in 2008) $76,000 (10X higher than the top 50%)*108X more than the average person who is in the bottom half of the population in health care expenditures, per person on average.

What are we actually spending all of that money on? Higher spending for hospital care and physician and clinical services accounted for half of the increase in total national health spending between 2005 and 2009 and more than 80 percent of the increase in private insurance premiums over the period. In fact, hospital care was the costliest portion of the total amount of healthcare expenditure across the board. Hospital care, Physician and clinical services, Dental, Home health care and Prescription Drugs made up 84% of the total health care spending. Within that 84% block of major spending, the figures broke down in the following ways:

35% went toward hospital care. "rising hospital spending was the largest driver of the increase, with the $51.4 billion spending increase for this sector accounting for almost half of the total rise in premiums" (NHEA).
24% went toward Physician and Clinical services, which grew by $33 billion over a four year period. "the five most expensive health conditions are heart disease, cancer, trauma, mental disorders and pulmonary conditions" (NHEA).
8% went toward dental and other professional services. And the other categories of prescription medicine and home health care contributing approximately 12 - 16% of spending.
What that means is that the costs of putting someone into a hospital is very expensive for all of us. While trauma and mental illness are not preventable, other conditions are possibly preventable or could be helped with a healthy dose of preventative medicineAnd what about "public health education and public health administration programs?" The targets of the political right, as being wasteful expenditures of government spending? Combined, their total cost was less than 9% of total spending for health care expenditures.

The NHEA also reports that health care premiums have risen 15%, on average, between 2005 and 2009. "from $697 billion to $801 billion, in 2009...89 percent of the total premium bill was used to purchase health care services for enrolled beneficiaries, and the remaining 11 percent was used to cover the net cost of insurance"(NHEA). While I am not one to give a whole lot of credit to the health insurance companies for providing good options and service to their beneficiaries, a 89% rate of return on investment does seem pretty good.
The bottom line is this: The NHEA is reporting that health care expenditures have rocketed since 1997 and is on a trajectory to continue to rise at an unprecedented rate.The NHEA shows that the cost of health care was approximately $4.1 trillion or (13.7% of GDP) in 1997. In 2009, that number had nearly doubled to $8 trillion or (17.6% of GDP).What will that number be in another ten years? With waves of baby boomers retiring and collecting medicare benefits? A high rate of obesity in children and a swath of "working poor" Americans with no private health insurance through their employer and no means of qualifying for medicare?

I am not a health nut or a Medicare reformer. As an average American (and one with no private health insurance) I am worried about how I will be able to pay for those costly hospital stays and clinical services which is one of the most admired components of our country - our quality health care system. I don't mind paying my fair share, and I certainly don't mind that my taxes are paying for retirees who worked to earn their social benefits. I am just concerned that we cannot afford to continue to treat everyone, if 5% of the population isn't taking care of themselves and is "hogging" all of the benefits and incurring all of the costs.


  1. First, don't apologize for giving offense. I support Medicare reform. But, my conscience and your facts tell me it's unsustainable. The bottom line is that we have to decide if old people who aren't wealthy have to die. Your question, however, is the best of all. How can we subsidize the people who don't care for themselves? NO MAJOR NEWS OUTLET HAS RAISED THESE FACTS. Democrats, no longer my party, are unwilling to take the high road and put this on the table. Trauma and cancer are unforeseen. Obesity, which exists in my own family and is standing beside me even as I write this, is unforgivable when it comes to health complications. How do we order people to lose weight? Maybe the health care crisis will make this hard thing easier to say.

  2. Health care will be apportioned according to funds available. The first step is laying out the facts, like this article. And, like this article, it doesn't take long before the facts are quickly mutilated. Take the "5% problem".

    "If 5% of population is not taking care of themselves and is hogging all the benefits and incurring all the costs" we should be rightly concerned. But that's not what the report says: it's not "all", it's 50% of costs. That still a lot but a 100% error in fact. And it's not just people who don't take care of themselves in this 5% group, there are those 55 and older. So, when Mr. Mac says "I don't mind my taxes are paying for retirees who worked to own their social benefits", what if he had a change of heart? If you were over 55 would you want him on the committee deciding your cancer surgery.
    And how do you measure the monetary value of old persons who have contributed to the institutions that make your very existence possible. These are the hard questions with mostly wrong answers.

  3. You are correct in your accounting. If I have implied that 5% of the population was tanking 100% of the health costs then I would be wrong in my facts, I will have to double-check my own work.

    I have received several comments from friends and colleagues who have interpreted my article to mean that we should have "death panels" or "cancer panels" to determine who deserves to be treated. I don't believe that at all! I am merely showing the statistics that our private health problems are taking a very public toll on our economy and health care costs for all. This is a rallying cry for mindfulness on all of our parts, not one for demanding social change at gun or scalpal point.

  4. The reality is that with limited funds life and death decisions as to who receives treatment will be made. Call it what you like. The point was that we all view the "problem", as you put it, through our own lens, so, the first step is not to distort the facts. The second step, what to do about it, is more complicated.

    Take obesity. Any action like surcharges or reduced services would be challenged under numerous civil rights laws. Counseling is about it, and pretty worthless if premature disease and early death aren't motivators. Smoking has a better chance of intervention now that it is becoming acceptable to test, and fire people in some states, for any trace of nicotine. Alcohol? But how far do we want to get wrapped up in this, outlaw currency and track all spending.

    And to throw chaos into the prevention argument,
    these people actually have lower total health costs: they DIE sooner. Healthy people cost more in the long run. It's sort of obvious. Old age by definition is more illness, and death comes at the terminal stage. So into the mix is the question of whether we want to reduce costs now or later.

    This really nothing new. Close family members have always made these kinds of decisions about death. We just need to very careful in the discussion about turning that responsibility over to the state.






  6. The cartoon is offensive. The fact is, no matter how healthy we are now, we will all die. And most of the health care costs come in the last few months of life, due to nursing home or hospital care. Like the other commenter said, the healthier people may actually cost more than the unhealthy, because the unhealthy will die sooner.
    Many of the chronic and expensive diseases are due to our modern lifestyle, and we do not seem to be addressing that problem. For example, if we are really worried about obesity as a major health risk, why the heck don't we treat obesity in a more successful manner? Non-prescription nostrums are junk, prescription meds used against obesity are shrinking in number, and no new safe effective ones are being developed. Bariatric surgery is drastic, expensive, and life-threatening. Changes such as more exercise and better food choices are very difficult for people to do, in the current urban 24/7 lifestyle, especially in this recession, where people seem to have to be "on call" to their jobs all the time, for fear of losing the job. Where does time for proper cooking and exercise get squeezed in?
    People need more help, not criticism, in living healthier lives.

  7. One thing that greatly skews the equation is organ transplants.

    It costs... what? about half-a-million dollars for a heart transplant. And that new heart buys you what about 5 to 10 years of extra life?

    So basically somebody has to subsidize a heart transplant patient to the tune of $100k per year for the remainder of their life.

    They are going to die any way. The sooner they face up to that fact the better for everyone.

    A big part of the healthcare costs are caused by the people who insist on clinging to every last second of life.

    Enough is enough, whatever happened to death with dignity? I'm not proposing that other people make the choice for you, I am proposing that people ought to know when to say that's enough.

    But part of that is the medical system itself, they don't dare to do anything that won't prolong your life. It is very hard to say no to them, it is very hard to get them to stop the treatments. Partly because of the legal liabilities and party because it is very profitable for them.

    Once upon a time, people used to be concerned about what kind of legacy they would leave for their children. They used to plan for their children to inherit their accumulated wealth. But that practice seems to be mostly dead, instead what we see is every last penny and even debt incurred in other buy a couple more months of life.

    Is it really worth it???
    Can the nation afford it???

    Obviously people don't believe in an after-life, not for real, not viscerally where it counts. Otherwise, if they did believe in an after-life they would not be clinging so hard, so desperately, to this one.

  8. Interesting article. The breakdown of spending on the top 10%, 5%, and 1% was of particular interest. The question I would ask is what is the age breakdown of that top 1%? It seems to me that we need to know, for example, what percentage of those approximately 3 million people are children receiving treatment for childhood cancers. How many of them are premature infants who require high-tech care before reaching a weight sufficient to leave the hospital? How many are people in the prime of life injured in a vehicular or other accident? How many and of what ages are transplant recipients? How many people (and of what ages) are in that 1% in more than one year? What are the medical conditions that put them into that group repeatedly? Given that mental disorders are listed as one of the "the five most expensive health conditions," how do they fit into the top 10% and above? What are the ages among those who died within one month of receiving "heroic treatment"? Within one year?

    When we look at income statistics, we see that at the top, the differences in income become greater and greater at smaller and smaller percentages, so that, for example, while the top 1% has vastly higher income than the 4% just below them, the top one-tenth of one per cent have incomes so large that they misleadingly raise the average for the entire 1%. Does the same thing happen with health care costs? Is there some very tiny percentage--say one-tenth of one per cent--that raises the average cost for the entire top 1% in a significant way? If so, what is that percentage and what treatments are they receiving that raise costs in this way?

    One reason I ask these questions is that I have two relatives that have had more than one extremely expensive hospital stay, each of which probably put them into at least the top 5% and possibly the top 1% at some point, especially when combined with other health care costs in the same year, but who are both now into their 90s and still chugging along, one--ironically, the one who overall is in better health--is still incurring large medical bills. Currently, a much younger friend who had surgery developed major complications which are causing costs to sky rocket alarmingly. Her survival is still in doubt; should money play a part in determining when treatment should stop? OTOH, several years ago, an elderly relative suffered a heart attack. The senior doctor who first saw him in the hospital said that he could not survive. A younger doctor did not accept this conclusion and arranged for him to be transferred to a larger hospital with better facilities. We, the family, should have stopped the transfer given his age and medical history, but really were in too much shock to do so. The cost for the three days he was kept "alive" by machine were incredibly high.

    I believe the questions raised by rising health care costs are extremely complex. Statistics must be treated carefully so that they enlighten rather than mislead. And, after all, in any one year, would you not expect that most of the population would have relatively low health care costs while a small percentage has very high costs? Thank goodness, the vast majority of us do not find ourselves dealing with really serious and expensive medical conditions year after year.

  9. Well written article. I'd be interested to know if they can breakdown expenditures by procedure. I'm a huge fan of the book Overtreated by Shannon Brownlee, which goes into a lot of detail about this. Hopefully, meaningful health care reform will address the malpractice lawsuits that cause doctors to practice prohibitively expensive "defensive medicine".

  10. You too, Zesty Mac,will be in the 5% of the hogs when you end up in a hospital/nursing home for the last two months of your life.You say that the ''working poor'' will not qualify for Medicare. Not true, they qualify by working 10 years and paying into the Medicare fund via their paychecks, the same as everyone else.
    1-2% of U.S. total health care expenditures are spent on infants weighing less than 2 lbs. at birth. NICU costs $3500+ per day and $1 million is commonplace per infant. 25% of these infants that live will be so handicapped that they never function independently. We all will be supporting them via our taxes. Unlike Medicare recipients that paid taxes into the Fund, these recipients paid nothing, and their young parents have paid very little. You could research how it is that other 1st world countries spend 1/2 of what we spend and live longer healthier lives. Doctors there earn 60% of what our doctors earn.And they are better at what they do- fewer medical errors, higher surgical standards.


Please be kind with your words. I have no intent to offend or ridicule with my blog. I will take into serious consideration, anything which is brought to my attention.