Why Just 5% of Americans Account for 50% of U.S. Health Care Spending

Dr. Nigel Verasami visits diabetic patient Saviana Santorelli, 83 at her home via a program called Independence at Home. It's part of the federal government's efforts to test new ways of improving the delivery of health services to seniors who are at risk for fragmented care, which leads to excessive use of emergency rooms and hospitals. Viviane Moos/Corbis via Getty Images

At first glance, the numbers seem ridiculous, even in a forum where numbers routinely look ridiculous.

Somewhere around half of the money spent on health care in the U.S. is spent on just 5 percent of the population, according to a 2016 report from the Department of Health and Human Services. Indeed, 22.8 percent of health care spending goes to just 1 percent of the population. These statistics have been this way for years.

That might, at first blush, seem out of whack, that so much of the more than $3 trillion Americans spend on healthcare flows to so few. But when you take a closer at those 5 percent doing all the spending (the "super-users"), that 5/50 thing is completely understandable.

"It's not a passing phase or a one-time phenomenon," Gerald F. Kominski, Ph.D., director of UCLA's Center for Health Policy Research, says of the statistic. "Almost everybody gets a cold. Almost everybody gets childhood diseases. But there's this 'tail end' of health care spending — the people who are really, really sick."

That really, really sick 5 percent doesn't consist of people who are old, necessarily, or at the end of their lives. Surprisingly, a 2015 study showed that, among those with the highest health care costs, only 11 percent were in their last year of life.

So, who's spending all the dough?

Who Are the Super-Users?

Kominski breaks them down into two groups.

"The first group ... can be any of us in any given year, if we're hospitalized with a condition that requires more than one or two days in the hospital," he says. "But those are, in a sense, the easy ones. Those are acute events that people recover form in most cases. So, their spending [eventually] goes down to normal, more typical levels."

Think, for example, an emergency appendectomy, an accident that calls for an overnight hospital stay, or scheduled event like having a baby. These are separate, defined, often once-in-a-lifetime (births notwithstanding) occurrences.

It's the second group in the 5 percent that gobbles up so many health care dollars. They are the ones who need regular physician care, repeated and sometimes lengthy hospitalizations and high-cost pharmaceuticals. Think chronic diseases, like diabetes, heart disease or cancer.

These are the ones that strain health care safety nets like Medicaid and, in turn, drive up rates for the rest of Americans when insurance companies hike premiums. In 2012, the CDC estimated that half of all American adults had at least one chronic health condition.

Look at it this way: The bottom 50 percent of health care users in the U.S. spend an average of somewhere around $264 a year, says Neeraj Sood, the vice dean for research at the Sol Price School of Public Policy and the director of research at the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California.

Those top 5 percent? About $47,000 a year. The top 1 percent? Try $107,000 per person, per year.

"It is out of whack in the sense that if you look at other countries, what you'll find is it's true that there is a distribution [like the one in the U.S.] but ... in the U.S., the distribution of expenses is definitely more acute. The bottom 50 percent is basically healthy. But in the U.S., once you fall ill, the U.S. tends to do more high-tech stuff on consumers that are ill," says Sood.

For those with chronic illnesses, every doctor visit, every X-ray or MRI, every trip to a well-appointed emergency room, every pill costs (and often costs big). Things add up quickly. The government and the insurance companies pay. And then they want that money back.

So, the mostly healthy pay, too.

Getting Costs Under Control

Experts contend that if we want to get health care costs under control — you might have heard some rumblings about that for, say, the past couple decades — one way to do it is to look at lowering the cost to those super-users. That's done either by finding a way to make the care cheaper through better management or by finding a way to keep super-users from needing the care in the first place. Preventative medicine can go a long way.

Neither one of those options is easy, though, so some suggest separating those high-end users from the mostly healthy rest of the population and making them pay more. That has its own issues as well.

"You can make health care more affordable for a large percentage of the population if you can isolate the high spenders. That is one option," Kominski says. "The other approach is to say, 'Look, any of us might be in that [high-user] health care category in any given year, despite the fact we may live a healthy lifestyle.' You can still have a heart attack. So, excluding people or pushing them off into some other system, or allowing the market to do that — which was what we were doing before the ACA [Obamacare] was enacted — if you want to be inclusive, you still have to find a way to deal with that extreme tail.

"My perspective is the all-inclusive approach is better. But it doesn't, in and of itself, solve the problem."

Finding a consensus on how to fix the American health care system has been so far impossible. But most everyone agrees; getting a grip on the super-users' spending will be a big part of any solution.

"The reason why this is a difficult problem to solve is that what is someone's expense is another person's income," Sood says, meaning that all that money going into health care is going out somewhere — to doctors, insurance companies, hospitals, Big Pharma. "There are going to be tradeoffs. There is going to be some pain with people in society when you reduce health care costs. We need to be willing to make those tradeoffs."