Half of America's $3.5 Trillion Healthcare Spend Goes to 5% of Patients

theatlantic |  Last year, America’s total medical costs hit a new record of $3.4 trillion, according to the federal government. That’s about 18 percent of the country’s total GDP, meaning that one out of every six dollars we spent in 2016 went to health care. The national doctor bill dwarfs anything else we spend money on, including food, clothing, housing, or even our mighty military.

If that $3.4 trillion were spread equally throughout the population, the bill would come to some $10,350 for every man, woman and child in the country. But fortunately –for most of us, anyway—the cost of health care is not equally distributed. Rather, a small number of Americans run up most of the expense. The biggest medical costs are concentrated on a fairly small segment of the population—people with one or more chronic illnesses, plus victims of accidents or violent crime. The cost is so concentrated, in fact, that an estimated five percent of the population accounts for 50 percent of total medical costs.

For the purposes of this project, we’re calling these people The Platinum Patients—they’ve also been described as “super-utilizers” or “frequent fliers.”

This concentration of total cost on a small segment of the total population is reflected in another common aspect of medical spending: the concentration of treatment, and cost, in the end of a life span. For most people, the vast majority of all the health care they’ll ever get comes near the hour of death. Hundreds of billions of dollars each year are spent treating Americans who are in the last weeks, or days, of life.

The old Marx Brothers’ joke—“I wouldn’t dare go to the hospital—people die there all the time”—is essentially true. Many people die in the hospital—in many cases, just after they’ve incurred a hugely expensive round of surgery, treatment, and medication. About one-third of Americans undergo operations in the last month of life.

If these issues were subject to hard, cold economic theory, a health-care system would probably distribute spending differently. The large sums it costs to keep a sedated cancer patient with dementia alive in a hospital bed from age 94 to 95 could presumably be directed instead to provide, say, a kidney transplant for a 40-something victim of renal failure, or a young woman who is too depressed to care for her baby. That money could be used for pre-natal care for uninsured mothers, setting the stage for both mother and child to have a healthier and happier life. Or, those funds could be used to provide health insurance at reasonable cost to the 29 million Americans who have no health coverage today.

One famous, or perhaps notorious, advocate of limiting late-in-life medical spending is former Colorado Gov. Richard Lamm, who was given the nickname “Governor Gloom” in the 1980’s for his argument that the elderly have a “duty” to avoid costly care when the end is near. There’s only so much money available for medical care, Lamm noted, so it ought to be used in the most efficient way. In the face of bitter criticism, Lamm stuck to his guns. Just this spring he told the Denver Post: “When I look at the literature, and there are such things as $93,000 prostate operations at some stage of prostate cancer that might give two extra months of life, it is outrageous.”   

The problem with these straightforward economic calculations is that they involve real human beings who have friends and relatives. That 94-year-old cancer patient, after all, may have loving children or grandchildren at the bedside; hardly anybody is willing to let Grandpa die just to save money for the overall health-care system.