USA Today reports some interesting statistics about health care spending:
Just 1% of Americans accounted for 22% of health care costs in 2009, according to a federal report released Wednesday.
That’s about $90,000 per person, according to the Agency for Healthcare Research and Quality. U.S. residents spent $1.26 trillion that year on health care.
Five percent accounted for 50% of health care costs, about $36,000 each, the report said.
This represents a slight drop in the concentration of health care costs since 1996, when “the top 1 percent of the population accounted for 28 percent of health care spending.” One in five people who enter the top 1 percent of spenders remain there for at least two consecutive years, tending to be “white, non-Hispanic women in poor health, the elderly, and users of publicly funded health care.”
Common sense would have suggested health care costs were heavily concentrated in a relatively small group of people with serious illnesses, but it’s interesting to learn just how concentrated those costs are. Here are the signature characteristics of the top 10 percent of health care spenders:
Sixty percent were women.
Forty percent were 65 or older.
Only 3 percent were ages 18 to 29.
Eighty percent were white.
Only 2 percent were Asian.
According to the latest census, 72.4 percent of the overall U.S. population is white, while 4.8 percent is Asian… but only 13 percent is over 65. Again, it’s not surprising to learn that the elderly are heavy consumers of health care, but it also means that spreading health care costs across the entire population in a top-down, government-administered system amounts to yet another inter-generational transfer of wealth from the young to the old.
The basic conundrum of health care is that a relatively small portion of the population consumes most of the resources, but entry into the Top 5 Percent or Top 10 Percent of health-care spenders is generally viewed as a misfortune, not a choice. This is one reason free-market solutions that treat health care like any other commodity run into trouble. People simply do not view health care as a “product” that shoppers “purchase.” It’s a burden dropped on sick people, largely through no fault of their own – and even when their behavior does directly contribute to illness, the consequences seem far out of proportion to their poor decisions. It may not be surprising to see a heavy smoker end up in a cancer ward, but no one thinks they deserve to be there, or should be abandoned to face the economic consequences of previous life decisions.
Not everyone makes it through their youth without significant health care costs, and not all elderly Americans have huge medical bills. These are questions of risk, not just cost. That’s why medical insurance makes so much sense. Insurance premiums are established on the basis of risk, allowing companies to profit by gambling that inexpensive policies sold to healthy young people are unlikely to incur huge costs.
But, as always, costs can only be kept down through competition. All of our current reforms and government takeovers reduce competition. The end user of health care is increasingly separated from any realistic understanding of the cost, while insurance companies are forced out of business altogether… and the survivors will find themselves increasingly hard-pressed to “compete” with Uncle Sam, who believes himself equipped with bottomless pockets, and isn’t very good at pinching pennies.
Concentrated benefits, diffuse costs, and widespread demand make health care an ideal target for socialism. In fact, it’s a nearly perfect rendition of the socialist “business model.” It’s no surprise the Left has been daydreaming about taking over health care for decades. Meanwhile, the far more efficient and moral concept of allowing the free market to manage risk, in a manner that generates profit while controlling costs, is going out of business.
Sign up to the Human Events newsletter