Researchers at the Agency for Healthcare Research and Quality updated the the spending distribution graph by population percentile using 2015 data. The findings are always important even though the general thrust is the same from previous updates. Most people barely touch the healthcare system:
95% of the studied population uses less than the mean healthcare expenditures. 5% of the population drives 50% of the spending. This is not a new finding. It is a consistent finding.
The challenge of the insurance model is that in most years, the vast majority of people will spend less than the average medical expenses. If premiums are average expenses plus an administrative load divided by the number of covered lives, then most people in most years retrospectively will have a bad deal. And since health insurance is so expensive, paying a lot and seemingly getting very little pisses people off unlike how I pay $50 every six months for renters insurance and have never used it.
This is why there are subsidies. This is why there is a mandate (for this week at least). This is why there are age bands. This is why there is reinsurance funded through non-premium funds. This is why there are so many policies that aim to either make the total cost of insurance lower (subsidies) or to partially segregate higher cost (reinsurance, high cost risk pools, prospective risk sharing etc). We segregate the highest risk out of the general pool by creating an incredibly well loved high cost risk pool in Medicare. We carve out some more high cost people by using Medicaid for the SSI population. We move end stage renal disease individuals and their high cost months out of the general pool as well. All of these can be viewed as ways of decreasing the amount of claims that have to be paid for out of premium dollars in a general insurance model.
Most people in most years won’t get hit by meteors. Retrospectively, almost any system will be at least adequate for people with low claims. A small number of these individuals who don’t have chronic high cost conditions will need a ten hour brain surgery (hi Mom, hope you’re feeling better today) and then cost-sharing and savings systems and the insurance function of insurance is highly valued. But retrospectively, there are far more people paying in far more than they are receiving. This makes the entire insurance value proposition a hard thing to sell.