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An Extreme Concentration of Expenditures

by Clive Riddle, June 30, 2011

NIHCM Foundation has released a new data brief: Understanding U.S. Health Care Spending – a fifteen page report based on analysis of data from the National Health Expenditure Accounts from CMS and the Medical Expenditure Panel Survey from AHRQ.

NICHM emphasizes that their “analyses document the extreme concentration of expenditures, with just 5 percent of the population responsible for almost half of all spending, and demonstrate the importance of rising spending for hospital and physician services as the primary drivers of expenditure growth.”

Here’s some selected data making these and other points, from their report:

  • National Health Expenditures in 2009 annually averaged $8,086 and 17.6% of the GDP, compared to $4,599 and 13.8% ten years earlier in 1999.

  • 84% of this spending covers personal health care services and products, including $2,471 annually for hospital care; $1,646 for physicians & clinical services;  $548 for dental & other professional services; $1,066 for home health and long term care; and $1,066 for prescription drugs and DME

  • The remaining 16% ($1,289 annually) of national health spending is for public program administration, public health and investment.

  • Analyzing portions of the population (civilian, non-institutionalized) and the percentage of health care expenditures they represent (using 2008 data): 15.6% of the population had no health care spending; 50% with the lowest spending accounted for only 3.1% of expenditures; while 63.6% of all spending was incurred by the top 10% of the population with the highest spending; 47.5% of spending by the top 5%; and 20.2% of spending by the top 1%.

  • Put another way, the lowest 50% of the population for health care spending averaged $233 annually, while the top 50% average $7,317. The top 30% averaged $11,196; the top 10% averaged $23,992; the top 5% averaged $35,820; and the top 1% averaged $76,476

  • Considering proportions of spending by age, those age 65 and up account for 3.6% of the population in the lowest 50% of spending; but 45.1% of the population in the top 5% of spending

  • Regarding drivers of the change in healthcare spending from 2005 to 2009 (which totaled an average increase of $1,259 per capita during that time): hospitals accounted for 34% of the increase; physician & clinical services accounted for 18%;  home health and long term care accounted for 16%; prescription drugs and DME accounted for 14%; other spending accounted for 12%; and dental and other professional services accounted for 6%

The report concludes that “these systemic factors affect growth in both public and private health spending:”

  • new medical technology

  • growing rates of obesity

  • fee-for-service payment incentives

  • growing economic prosperity (remember the timeframe starts in 2005 and ends in 2009)

  • expanding insurance coverage (Medicaid – not commercial)

  • defensive medicine and more intensive use of diagnostic testing

  • an aging population

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