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Small group of very ill patients accounts for half of medical expenses

Marcus Pickett

About 5 percent of the U.S. population accounts for nearly half of all health care expenditures, according to the National Institute for Health Care Management (NIHCM) Foundation. One percent of the population accounted for about 20 percent of total expenditures.

The cost of health care has been on a steady upward climb, and everyone from elected officials, to insurers to employers have been trying to figure out how to curb it. The NIHCM Foundation’s research provides some ideas about why health care has gotten so expensive — and what is putting the most stress on the system.

Who is using the most health care?

Skewed health care spending is hardly new. According to the NIHCM Foundation, about 5 percent of the population accounted for 56 percent of health care costs more than 20 years ago. In 2008, the top 5 percent accounted for 48 percent of expenditures. Yet that decrease doesn’t mean overall costs are going down. Instead, according to the NIHCM Foundation, serious health problems (like obesity) are simply more widely distributed throughout the population. In other words, even the less “expensive” part of the population is starting to cost more as obesity-related diseases like hypertension, diabetes and high cholesterol become more common.

It’s important to remember that it’s not just people who are costing the system more; serious medical conditions are as well. Heart disease, cancer, trauma, mental health disorders and pulmonary conditions made up 33 percent to 37 percent of health care expenditures between 1996 and 2006, according to the NIHCM Foundation. Older people, who are at greater risk for these five health conditions, are more likely to fall into the high-consumption group. And those with multiple chronic conditions rack up costs as much as seven times higher than those with just one, according to the Agency for Healthcare Research and Quality.

Health care inflation

Health care is getting more expensive with each passing year. Between 1997 and 2009, average per capita health spending nearly doubled from $4,166 to $8,086, according to the NIHCM Foundation. This isn’t just the standard rate of inflation. Costs are accelerating. Over the same time period, health spending went from 13.7 percent of gross domestic product (GDP) to 17.6 percent of GDP.

The cost of some services is rising faster than that of others. Long-term care and facility-based care, for example, are outstripping other sectors of the health care industry. Hospital care, already the largest component of health care expenditures, rose roughly 20 percent between 2005 and 2009. Home health and long-term care facility services showed an even steeper climb of nearly 23 percent. By comparison, health care costs over the entire industry rose by 18.4 percent over those same four years.

Keeping costs down

The NIHCM Foundation Study shows the complicated challenges the U.S. faces in controlling its health care costs. Along with new (and expensive) medical technology, obesity-related conditions and an aging population, the study cites the following key drivers of health care prices: fee-for-service payment structures, expanding insurance coverage, and increased defensive medicine and diagnostic testing. In other words, the system rewards doctors with insurance money if they provide care, whether that care is necessary or not.

How much each of these factors contributes to rising costs is unclear. Yet, according to the NIHCM Foundation, if they are allowed to contribute unchecked, they will continue to create a perfect storm of rising health care and insurance costs.

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