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What Is The Most Costly Healthcare Expenditure?

The National Institute for Healthcare Management Foundation is a nonprofit, nonpartisan organization focused on healthcare. The foundation just published an excellent report on the distribution of  healthcare costs in the population.

The results indicate that reducing healthcare cost is all about reducing and managing chronic diseases.

U.S. healthcare spending has sharply increased between 2005 and 2009 by 23 percent from $2 trillion to $2.5 trillion per year.

This is a result of a combination of factors. Chief among them is the increasing incidence of obesity.

Who spends the money?

Five percent of the population is responsible for 47% of all health care spending in the United States. Ten percent of the population accounted for 63.3% of the expenditures.

Fifty percent (50% percent) of the population accounted for only 3% of the healthcare expenditures.

The low cost person spent $233 in 2008 for healthcare services. Those in the top half of spending cost insurers, the government, or themselves $7,317 a year. The top 1 percent cost $76,476 per year. These are discounted fees not retail fees.

Healthcare expenditures were concentrated among a small group of high-cost patients. These high cost patients were older patients (over 55 years old) with one or more chronic diseases. If they were young and they had one or more chronic diseases healthcare expenditures increased. The more chronic diseases a patient had, the higher the likelihood the patient would be in the top 5% of healthcare dollar utilizers.

Fifty percent of the top 5 percent of healthcare spenders had high blood pressure, a third had high cholesterol, and a quarter had diabetes. The incidence of hypertension, hypercholesterolemia and adult onset type 2 Diabetes Mellitus is directly proportional to the presence of obesity.

It is logical to conclude that as the incidence of obesity and its severity increases the complications of obesity (hypertension, hypercholesterolemia, and Type 2 Diabetes) will increase.

It follows that healthcare costs will increase as a result of the increasing incidence of obesity. America must control the obesity epidemic.

Little progress is being made to decrease the increasing incidence of  obesity or Type 2 Diabetes.

In a perfect world, if obesity could be decreased, the incidence of chronic disease would be decreased.

In a perfect world, if the patients with chronic diseases could be taught to self-manage their disease, healthcare costs would decrease because the incidence of complications of chronic disease would be decreased by at least 50%.

The treatment of the complications of chronic diseases is the most costly healthcare expenditure.

President Obama’s Healthcare Reform Act mentions prevention and chronic disease management. There are no concrete incentives for patients to learn how to manage their chronic diseases. There are no specific financial incentives for physicians to develop facilities to teach patients to mange chronic diseases.

Americans are in for a long and costly dysfunctional healthcare system to the disadvantage of consumers and physicians.

President Obama’s Healthcare Reform Act puts consumers in a passive dependent position. Consumers need to be put in a proactive position to care for and be responsible for their health and healthcare needs.

Physicians have to have incentives to teach consumers to be self-reliant.

*This blog post was originally published at Repairing the Healthcare System*


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4 Responses to “What Is The Most Costly Healthcare Expenditure?”

  1. Ben says:

    One small quibble: You claim that “It follows that healthcare costs will increase as a result of the increasing incidence of obesity. America must control the obesity epidemic”… while this may be true, it’s certainly not a foregone conclusion. An article by Dr. Rich a few months ago highlights a study looking at long-term cost of care between smokers, the obese, and everyone else and found that the “healthy” people cost the system more over the long-term because they lived longer (and thus were more likely to become – as you put it: “high cost [...] older patients (over 55 years old) with one or more chronic diseases”).

    To quote Dr. Rich’s paraphrased summary of the study: “In this light, a recent article in the Public Library of Science Medicine Journal has created something of a problem for the anti-obesity movement. This article compared the lifetime cost of healthcare (beginning at age 20) for obese individuals and for smokers to the lifetime cost for non-smokers who maintained a healthy weight. Naturally, the study concludes that the healthy individuals can expect to live longer than the obese and the smokers (84 years vs. 80 and 77 years, respectively). However, the healthy young people will consume $400,000 in lifetime healthcare costs, vs. only $365,000 for fat people and $321,000 for smokers. (The cost savings in the obese and the smokers arise from their relatively premature deaths.) Therefore, healthy people, over their lifetime, are a bigger drain on the healthcare system than the obese and the smokers.”

    I have not read the original study, but I’m guessing the summary is relatively accurate, and it’s a relatively logical outcome when you consider the proportion of healthcare dollars that are spent on the elderly. Controlling obesity has merit whether or not it is, in fact, the root of much healthcare spending, but we can’t necessarily presume it to be the case, and until the link is more firmly established we should be cautious about using it as the basis for policy decisions.

  2. Stanley Feld M.D.,FACP,MACE says:

    I would be very careful using this article as definitive evidence of cost in a population study.

    1. The population used was 500 people in each group at the age of 20.
    2. These are estimates and simulations.
    3. We have no understanding of whether the confounding variable that influence diseases and cost of care are similar in the Netherlands and the U.S. even if the method of estimating and simulating is correct. For example the incidence of Type 2 Diabetes in obese Latinos is way over 20% in the US. What is the incidence of Diabetes in obese people in the Netherlands. I would assume the Netherlands are mostly Caucasians.
    4. Obesity is just the stimulus to other diseases and other diseases kill. It is a function of how long someone is obese and what is the obesity burden on their genetic make up.

    The are many pretty resistance to disease Caucasian obese people in the U.S.

    There are many other defects in the study that make it hard for me to belief that the estimate i valid.

    Below is from the methods section of the study Public Library of Science Medicine Journal

    “With the model we estimated survivor numbers and disease prevalence numbers for three different hypothetical cohorts consisting of 500 men and 500 women aged 20 y at baseline: (1) an ‘‘obese’’ cohort, never-smoking men and women aged 20 with a BMI above 30; (2) a ‘‘healthy-living’’ cohort, never-smoking men and women aged 20 with normal weight (18.5 BMI , 25); and (3) a ‘‘smoking’’ cohort, men and women aged 20 with normal weight who had smoked throughout their life.”

  3. Jeremy Engdahl-Johnson says:

    What is the economic burden of diabetes? Proper mgmt and control could save 49,000 lives and $196 million annually. http://www.healthcaretownhall.com/?p=2699

  4. Stanley Feld M.D.,FACP,MACE says:

    Jeremy is correct.

    This is today’s number. We the increase in obesity and the secondary increase in insulin resistance the number of Diabetics is increasing and the number of complications of Diabetes is increasing. Type 2 Diabetes is many times asymptomatic. Lots of people presenting with a myocardial infarction have a high blood sugar discovered for the first time.

    Complication of Diabetes occur about 8 years after the onset of Type 2 Diabetes. This is the reason early detection and control of blood sugar elevations is important.

    With the childhood obesity epidemic we are seeing more kids with elevated blood sugar at an early age.

    Intensive management of blood sugar must be self managed. The physicians job is to teach patients how to control
    their blood sugars. This will decrease the incidence of complication by at least 50% if you start early

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