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.
Edmund dantes
And “conservatives” will tell you this is why “catastrophic” coverage is all that is needed. Ignoring the chronic, meteors, and the old world w/out caps (and other shenanigans).
mmeep
I’m in that boat, the one in which few if any services are used but the cost is crushing. I would just as soon pay 500 to 600 a month in taxes if that’s going to get coverage I can use without fear of going broke. I’ve no idea if a national single-payer plan would mean a tax increase like that. But if there were no other costs like office visits and co-pays (for meds I might need, which I don’t need now) then I could actually afford to see a doctor, aside from the catastrophes that hopefully won’t happen. Hard sell? No kidding.
Victor Matheson
I assume the distribution numbers are for annual expenditures. It would be interesting to see either a longer time period distribution (say, 10 years) or a lifetime distribution. Figure this would be way flatter for a lifetime as all of us die sometime, and most of don’t go quickly without any medical intervention.
David Anderson
@Victor Matheson: Other research shows that about half of the Top 5% of annual spend will persistently stay there, while the other half of the Top 5% come in and out due to meteors hitting them as random-esque events.
ken
@David Anderson: Thanks, I was just going to ask about persistence
lowtechcyclist
20% of the population drives 80% of the expenditures.
Sounds like a rule I’ve heard somewhere.
Bob Hertz
this is a very important topic to me. I will write you a longer post on it later.
Meanwhile there was a surprisingly intelligent commentary by Kevin Williamson of the National Review. (dec 5 on the private option). The following passage was relevant:
……………..”Employees enrolled in plans at work (a) pay only a small portion of the premium, (b) have the premium withdrawn by their employer from their paycheck, and (c) cannot enter and exit the plan freely. The sizable subsidy encourages very high rates of participation by young and healthy employees who enroll and stay enrolled. Insurers argue that actuarial data demonstrates that independent individuals who personally pay the full premiums tend to move in and out of the insurance market based on their personal financial circumstances and, most importantly, their health status and/or perceived need for health services. This is especially true when a plan is a guaranteed issue policy, i.e. you can’t be turned down. As a result, those most likely to enroll in a voluntary, unsubsidized group plan tend to be those individuals who are unhealthy (and most need coverage) and/or those who know that they need or want an elective procedure i.e. knee replacement, pregnancy, etc. Consequently, enrollees in this type of plan make claims at a much higher rate than is the case in an employer pool of a similar size. And as a result, insurers shy away from creating such plans.”
Read more at: http://www.nationalreview.com/article/454346/health-reform-private-public-options-back-square-one