By Pension and Benefits Editorial Staff
The majority of health spending is consistently spent by a small minority of health care employees, according to recent research from the Employee Benefit Research Institute (EBRI). The Issue Brief, Persistency in High-cost Health Care Claims: “It’s Where the Spending is, Stupid”, noted that generally, 20 percent of those insured by employer-based health benefits in the U.S. account for 80 percent of total spending on health care services, with 10 percent of the population accounting for 70 percent of spending, 5 percent responsible for 56 percent of spending, and 1 percent accounting for 28 percent of spending.
When considering persistency of these high-cost claims, the study found 27 percent were in the top 10 percent of spending for 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 for three or four years, and only 2 percent were in the top 10 percent each of the five years.
Despite a small percentage of employees controlling most of the spending on health care services, employers offer health plans that largely look and feel the same to plan enrollees regardless of health care usage. Although targeting frequent users would have the biggest impact on spending, it is also the most challenging population to address.
“The characteristics of the persistently high-cost claimant group were different from the characteristics of the population never in the top 10 percent,” said Paul Fronstin, director of health research and education program at EBRI. “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 those in the top 10 percent for three to four years, were ages 50-64, compared with 30 percent among those never in the top 10 percent. In addition, persistently high-cost claimants were also much more likely to be the spouse of the policyholder.”
EBRI’s findings show that cost-sharing may be ineffective in addressing a large portion of health care costs. “Consumer engagement through cost-sharing may be effective in addressing day-to-day use of health care services, but it will not address the bulk of health spending that is not only above deductibles, but also above out-of-pocket maximums,” said Fronstin.
The 5.8 million individuals examined in the 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 in spending during 2013-2017 accounted for only 20 percent of spending in 2017.
The presence of certain medical conditions impacts the likelihood of becoming a persistent high-cost claimant. 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.
The study also finds that individuals persistently in the top 10 percent of claimants have a different distribution of spending than those without persistently high claims. 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 of spending.
Inpatient services accounted for 27 percent of total spending for those in the top 10 percent for one to two years, and 22 percent among those in the top 10 percent three to 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,” said Fronstin
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