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April 12, 2016  |  Monica E. Oss

Monica E. Oss

There has been much attention paid to the 5%:95% dichotomy in health care spending – The Marketing Challenge Of The 5% & The 95%, Five Percent of Americans Responsible for Half of U.S. Health Spending, and What Are The Spending Stats On Chronic Conditions?. The summary – about 5% of the population in the United States accounted for 48.7% of the total $1.4 trillion in health care expenditures among the U.S. civilian non-institutionalized population.

But new statistics from the Agency for Healthcare Research and Quality (AHRQ) point out the “compression” in this concentration of spending – that one percent of the U.S. non-institutionalized population accounted for 21.5% of the $1.4 trillion total health care expenditures (see 1% Of Population Accounts For 21.5% Of Health Care Expenditures, Mean Annual Per-Person Expenses Were $95,200 For The Highest Cost Consumers).

What does this spending look like over the entire population?

  • The top 1% of persons ranked by their health care expenses accounted for 21.5% of total health care expenditures with an annual mean expenditure of $95,200.
  • The top 5% of the population accounted for 48.7% of total expenditures with an annual mean expenditure of $43,253.
  • The top 10% of the population accounted for 64.9% of total expenditures with an annual mean expenditure of $28,808.
  • The top 50% of the population ranked by their expenditures accounted for 97.1% of overall health care expenditures with an annual mean expenditure of $8,619, while the lower 50% accounted for only 2.9% of the total.

The challenge for payers, health plans, provider organizations, and clinical professionals? How to identify (earlier rather than later) the consumers most likely to spend the most resources, and how to determine the best (from an outcomes and cost perspective) interventions. The solution to this challenge is more and better analytics for consumer profiling; use of practice-based evidence to identify the best care coordination and care management approaches; “calibrating” value-based reimbursement arrangements to best reflect consumer characteristics; and analysis to inform payer and public policy. It is better information to align consumers’ needs with community resources (see Meeting The Superutilizer Challenge).

To this point, my colleague and OPEN MINDS senior associate, George Braunstein, notes that we need more of these analytics and the collaborations to put the data into practice:

The further refinement and definition of the high-risk, high-cost populations based on the recent data from the AHRQ provide enlightenment for providers and health plans regarding the type of investments that are needed to actually create the type of outcomes and cost reductions they are seeking. I believe there is a general awareness of these risk groups; however, more data on this population, their conditions, and their support needs is necessary for provider organizations to find the best ways of serving these consumers. Experience shows that a population with this type of high health care expenditures is also going to have some complex support needs, which require addressing social determinants of health.

Future partnerships between health care payers, providers, and social policy leaders at the local, state, and federal level will be vital to address these gaps. A number of state and local health departments have done significant assessments regarding the impact of social determinants in their communities, but those findings have not always been connected to health policy and funding. I would see a potential future where these types of partnerships will be vital to creating effective outcomes for the 5% or the 1%. Eventually, health outcomes will not be just measured by a reduction in symptoms and lab values, or a reduction in the use of intensive treatment modalities such as inpatient. Outcomes can also be measured by adequate housing, adequate access to healthy foods, and adequate access to quality education and vocational opportunities. When all of these issues are addressed, we’re seeing that health care expenditures can go down as well.

For more on the use of data to inform the management of the most complex consumers, check out these resources from the OPEN MINDS Industry Library:

  1. Are Superutilizers Your New Market?
  2. How To Define A Superutilizer Population
  3. What Does Care Management Look Like For Superutilizers?
  4. Using Pharmacy Data Analytics To Improve Medical Home Performance
  5. Using Analytics For A Competitive Edge – Your Checklist For 2016

And for even more, make sure to join us on June 9 at The 2016 OPEN MINDS Strategy & Innovation Institute for the session, “When You’ve Seen One Health Home, You’ve Seen One Health Home: The Provider Perspective On Health Homes” – featuring Mitchell Berdie, Psy.D., Senior Associate, OPEN MINDS; Tom Sebastian, MS, MPA, President & CEO, Compass Health; and Kathleen Clay, Health Home Director, Hudson River Healthcare, Inc.


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In The OPEN MINDS Library (March 2016)

1) CMS To Provide Federal Match To State Medicaid Programs To Support EHR Adoption By Behavioral Health & Long-Term Care Provider Organizations
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2) Beacon Health Options Wins Washington State Behavioral Administrative Services Organization Contract
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3) The Management Transition To Value-Based Reimbursement Is All About The Performance Metrics
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4) Pennsylvania RFP Outlines Plan To Move Medicaid Long-Term Services To Managed Care Starting 2017
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5) Illinois Medicaid Requiring Care Coordination Plans To Become Full-Risk Managed Care Entities
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