Via The Incidental Economist


Category: Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

34 Responses to “Concentration of US Health Care Spending”

  1. Conan says:

    So what do we do?

    A) Raise taxes on 100% of the people to pay for the 1 to 5%?

    B) Cut costs?? The top 5 % by a 1/4 & save 150 billion or by 1/2 & save 300 billion? Do we do this by setting prices, out & out cuts in service, efficiencies to the system, socialization, setting up Medical Boards to decide who gets what????

    C) A & B

    D) Kick the can down the road.

    Also it would be interesting to see the growth trend. The Higher cost 5% maybe growing at multiples of cost faster than the lower 50% folks.

    In more than one sense of the word this should be a “LIVELY” debate!!!!!

  2. Rich in NJ says:

    End of life care is very expensive. Few people want to contemplate the denial of care for loved ones (or themselves), but absent some type of spending limit or an enumeration of conditions that don’t warrant continued care (probably imposed by government created bodies, that have been called death panels by some), we will never be able to truly bend the cost-curve on health care spending.

  3. spooz says:

    As long as end of life care discussions get hysterics screaming about death panels, we won’t be able to have a sensible dialog about evidence based medicine and palliative care over costly procedures which are unlikely to change the prognosis.

  4. willid3 says:

    wonder if its because the majority of us wont go to the doctor unless there is a lot of pain involved. because we don’t want to spend the money on it. so that when we do go its when its the most expensive? its also possible that we spend a lot at the end of our lives, but that doesn’t necessarily mean when we are older either, as the very young (babies included) can also be in this category. and then are those who health is precarious to begin with. an example is a young

  5. Low Budget Dave says:

    I don’t think it is the same people at the top every year, unless you mean “people who are in the last stage of life.”

    I know someone who essentially spent zero on health care for 49 of the last 50 years. In the last two weeks of her life, they put her in a hospital and spent a quarter million trying to keep her alive, mostly against her will, even though they knew it was hopeless.

    So even if you are adding years together, in two weeks, she went from $0 per year to $5000 per year.

    So here is my question about the Ryan plan: Will there be “death panels”?

  6. Frilton Miedman says:

    Two problems, largely ignored, yet major factors here.

    1) Redundant procedures/medications, artificially inflating demand & costs by taxpayer subsidy…procedures, supplies and pharma that isn’t necessary, yet doled out like water because doctor and patient have no concern for costs, it just goes to medicare/medicaid with no questions asked.

    2) Actual costs, this industry is replete with 8 figure salaried executives, 7 figure salaried sales reps who make more than doctors and a plethora of other bloated incomes that have been inflated by the above problem.

    We’re going broke feeding insane mark-ups and wage standards, meanwhile, paid political puppets in D.C. refer to that as the “free market”…..that intervention is a “government takeover” with “death panels”.

    Instead of blindly cutting services, we should be cutting costs and scrutinizing redundancies – should an industry that derives 50% of it’s revenues from tax money really be so replete with 7 & 8 figure salaries?… technicians making 6 figures?

  7. Rich in NJ says:

    “wonder if its because the majority of us wont go to the doctor unless there is a lot of pain involved. because we don’t want to spend the money on it. so that when we do go its when its the most expensive?”

    To the extent that’s true (I don’t think it’s the primary cost-driver), that’s why preventive care is often completely covered by many health care insurance plans (and part of Obamacare), and why expanding such coverage may well save money over time.

    “So here is my question about the Ryan plan: Will there be “death panels”?”

    He hasn’t demonstrated how he would reduce Medicare spending other then by setting spending limits. One problem is that if, under his plan, Medicare recipients are given insufficient premium support to purchase good health insurance plans, they may be more likely to defer care until they are in a worse condition, thereby putting more pressure on overall costs, and simultaneously decreasing the chance of a positive outcome. That itself may well be a constructive death panel.

  8. jus7tme says:

    The chart and the numbers tells us two things:

    1. In any given year, about 1% of the populations is VERY seriously ill

    2. the cost of getting care for such seriously ill patients is much too high.

    That is what the chart says, no more or no less. So, we should concentrate on reducing the cost of care for serious illnesses, while keeping the cost of preventive care down as well.

  9. socaljoe says:

    I wonder how health and sickness is distributed among the population?

    Does 5% of the population represent 50% of the sickness?

    It’s not inconceivable considering that a 5% of the population is probably within a few years of death.

    We all can look forward to becoming part of the 5% in our final years.

  10. icantdance says:

    my limited understanding is 1) torte reform and 2) controlling end of life care, would go a long way. One of those brilliant info graphics that comprehensively covers US health care, and provides other countries cost for comparison might be illustrative for tbp crowd

    As for the electorate crowd, we need an answer to the effective marketing phrase, ‘death panel’

  11. eliz says:

    IMHO the whole health insurance, health care system is an example of something gone very awry. In what other industry does a consumer have no idea what the bill will be – i.e. no estimate, no choices – when they walk in or walk out? It’s nuts. If you have ever tried to find out what something will cost you, it suggests you are intelligent, tenacious, persistent, and have some time on your hands – not a category that applies to most people.

    If you want to fix the financial nightmare of “health (sick) care,” the first step is to require every facility to post their charges, including the variations on the theme – the negotiated rates with various carriers and self-insured plans. Make that public.

    Step two is that every health plan should be in “plain english” with every detail clear and apparent. If a person is covered for preventive care, then what that means should be clear as day. He/she shouldn’t go into the doctor’s office for a routine exam and come out with unanticipated expenses (e.g. the doctor checks for anemia – oops that isn’t part of preventive care, etc.)

    People need good information in order to make informed decisions.

  12. M says:

    I wonder how different this is from other insured populations.

    I’m no actuarial and I don’t play one on the interenets. I don’t know health care numbers compare with other types of insurance. But, typically insurance covers rare but expensive events. So, it’s reasonable to expect rare events to account for the majority of the outlays in most insurance schemes. If the events covered were common we’d just budget them in and cut out the insurance middle man. No?

  13. Robespierre says:


    I think that the graph is showing “accumulative” spending. In other words how much has a person spent up to a given age from birth-date and not that people at 100 year (lets say) spend more than say people at 1 year old. Just in quantities how many 100s do we have and how much the spen compare to the number of 1 year old?
    I think the graph needs some explaining…

  14. ilsm says:

    Frilton Miedan,

    Medicare vouchers, medicaid vouchers/block grants are life support for insurance profits, and overhead. They cost more and deliver less, but the med insurance cabal (the other MIC) gets a pass a few more years.

    Rich in NJ,

    The god of the market will cover the need for “death panels”, and the deflation of the bankrupts assets are good for the moneyed crowd. R-Ayn is only joshin the papist vote with denying Ayn Rand.

  15. constantnormal says:

    Death panels. It’s the only real solution to this problem.

    Whether you “incentivize” health care providers to deliver less than their most expensive health care, regardless of the impact on the quality of life of the patient (which in many cases, ends up lowering it by spending more), or offer bounties to “angel of death” health care professionals for painlessly dispatching those who have exceeded their lifetime health care budgets, it’s the same thing … rationing.

    Whether we ration by price (as we do today), or by need (and just who determines need?), or by some other system, it’s still rationing. The free market system operates by rationing according to matching sellers and buyers, in accordance with the buyers’ ability to pay, and the sellers’ need for revenue.

    We just need a better system of rationing. And more humane “death panels” than the ones we have today.

  16. rd says:

    Perfect example of the Pareto principle.

    20 percent of the population is 80 percent of the spending. Of that top 20 percent, the top 20 percent of it is 80 percent of that group’s spending.

    The money is in the top 20 percent of the population. That is where the focus needs to go to understand the causes and potential mititgation of that spending.

  17. constantnormal says:

    eliz — in addition to the things you suggest, allow me to make a small suggestion … no payment for services that do not produce the expected results. The way that the “system” operates today, there is every incentive to expend the maximum amount of money, regardless of outcome.

    If the existing “lemon laws” were extended to cover health care, practitioners would be a lot more circumspect about throwing every diagnostic test in their arsenal at problems that are a long way from life-threatening. A lot of medical problems clear up on their own, with no doctors or hospitals having a clue as to what they were or why the appeared/disappeared. But they are happy to bill tens of thousands of dollars for no service delivered, for diagnoses of “I don’t know”. Or passing by the obvious diagnosis to run even more tests. That happens a lot as well.

    There is even incentive for hospitals to put their least qualified diagnosticians on the front lines, because the least qualified tend to rely a lot more on an arsenal of diagnostic tests than do qualified practitioners.

    Who benefits? The health care organization, all the way up the org chart. And the health insurers. I’ve repeatedly observed this system in operation.

  18. DSS10 says:

    The chart is very disingenuous to the point that it is offensive. The term “spender” makes it look as if the expenditure are frivolously driven by patients when its really the physicians and hospitals that drive expensive treatments for “spenders.” More than likely one or two national providers treating perhaps 15-20 illnesses are responsible for 20% of medical expenditures and if you were to look at those treatment expenses most of the money would be going to overhead and indirect costs.

    This is a classic misinformation meme right up their with death panels, wilie horton, and “no new taxes.”

    Its always a flag when some one has to post a graph that three years old to make a point.

    FWIW: The National institute for Health Care Management research and Educational Foundation is NOT a part of NIH but a private non-profit organization staffed with insurers named to sound like a government agency.


    to offer–three starting points–background on the, contrived *Reality We are witnessing–as laid out by the Charts, in the Post..

    con·trived (kn-trvd)
    Obviously planned or calculated; not spontaneous or natural; labored: a novel with a contrived ending.
    con·trived·ly (-trvd-l, -trvdl) adv.

    The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000

    also, to yon Ritholtz’, earlier, Post..May We seek the Truth of the Issue at hand..of course, if We can..~

  20. constantnormal says:

    This is old news, the profession knows how to deal with it — here are some relevant links:

    Lower Costs and Better Care for Neediest Patients : The New Yorker

    McAllen, Texas and the high cost of health care : The New Yorker

    One Doc’s Prescription For Hassle-Free Healthcare : NPR

    Sadly, though, the health care industry is unwilling to go where it knows it must go, preferring higher revenues and more money in their pockets at the top … and our society is (insanely) unwilling to make them behave …

  21. spooz says:

    DSS10, research cost of end-of-life care before making assumptions about what is “more than likely”.

  22. DSS10 says:

    spooz, yes end of life care is very expensive which is driven by health care providers as opposed to patients. There is so much “care” that is given to terminal patients which is both cruel and inhuman which only benefits the health care providers. If you ever had a relative with a terminal disease (and I truely hope you never do) you will know what I am talking about. The fact that I know who these bozos are and that I work on the development of health care strategy/policy might give me some insight in to these issues so I can state in no way did I assume anything.

    The question you should be asking is: Why end of life care is so expensive here and has such bad out comes? I’ll give you a hint too, it’s not the patients.

  23. DSS10 says:

    RE: Mark E Hoffer:

    The AMA was a guild, not a cartel. Now with the majority of physicians being employees and not sole proprietors or sub-chapter S corps, the true drivers in the medical market are the large hospital corps and HMO’s who have been buying physicians practices as fast as they can for the last twenty years.

  24. Lyle says:

    Since a large part of the cost and the default option is treat as much as possible, both physicians and clergymen need to be in a position to counsel folks on these issues pre-need. Both get the forms filled out for the health care power of attorney and the advanced directives, and be sure that the folks named are clear on your wishes. (This might well be the session with a member of the clergy, to ensure that following the patients wishes will not be a guilt trip on others). One might also have a lawer named so that if there is push back from the medical guild, you have an advocate as well. But of course the right to lifers tend to object here as much as at the other end of life.

  25. drbobgleeson says:

    American medicine is 2 x as expensive as the next most expensive country and our health product ranks near Cuba’s for several reasons. Some of the above commentaries have touched on them: prolonged and useless end of life care, excess testing with no change in treatment, inappropriate medical treatment where the scientific evidence does not show benefit, tort reform, and lack of excellent outcomes research (now part of the ACA). I hope we can eventually discuss them all on these pages.

    In this instance we are talking about how to spend $1,000,000 a year per person in direct health care costs (my guess at the top 1%). You can probably spend $500,000 a year by being a 28-year old with acute leukemia who needs a bone marrow transplant , or a 48 -year old who breaks her neck falling from a ladder while cleaning the gutters, or an 86 year old who has severe complications following a hip surgery with complications leading to an ICU stay. Throw in a little kidney or liver or lung or bleeding complication and voila, you double the costs to $1,000,000. Are these costs unreasonable? I do not know for certain.

    We also have a plethora of evidence that even modestly good health habits in middle age have a profound effect on long-term health, health care costs, illness, disability, and a maximal chance of living well until very old age. See or, etc. etc.

    I suggest Atul Gwande, a surgeon writer for the New Yorker who has written about

    1) improving costs by improving health care for the neediest

    2) physician over-ordering high-cost medical tests with no change in outcome

    3) and whether a corporate value-added approach with third party (physician) panels dictating care is the way to go

    I run an academic executive physical program and a preventive cardiology / lipid management clinic. I’m trying to prevent illness and excess costs.

    Robert Gleeson

  26. nucemgd says:

    “Why end of life care is so expensive here and has such bad out comes? I’ll give you a hint too, it’s not the patients.”

    Did anyone else find this statement funny??

  27. DSS10 says:


    There is a good and a bad way to die. I am amazed at how many terminal patients are on chemotherapy at the time of death or who have invasive surgery in the last month of life. Yes it’s a bit funny, but sad and expensive too…

  28. bear_in_mind says:

    @DSS10: I concur with the general drift of your commentary.

    The profit motive obviously rests with the medical profession. Couple that with the America’s immature and narcissistic approach to aging and/or end of life, and you wind-up with a disastrous approach to medical care.

    You see this in practice with persons who are hopelessly medically compromised, who are suffering from multiple organ failure and in unimaginable pain, but still demand “Full Code” status. There’s where the right side of this chart goes vertical.

    Let me be clear. Who wouldn’t want to have another week, month or year with a loved one? That’s a no-brainer. But each and every one of us received a round-trip ticket and NOBODY is getting out alive. That’s also a no-brainer.

    As I see it, the crux of the problem is rather than preparing to accept death as one of life’s passages, too many of us try to trump reality. And yes, medical science has been elevated to the point of perpetuating a sense of immortality. You know, “Hey, why not try? Maybe the doctor can save him?!”

    Too often this reflexive pursuit of an unachievable end keeps us cocooned in denial, diverting us from exploring the really difficult questions such as, “What is the really humane thing to do?” and “What is really most important to ‘Bob’ if he’s dying?” or “What will provide him/her dignity and integrity in preparation for their departure?”

    So, I say if it takes a ‘death panel’ (what a preposterous meme) to accomplish this end, then let’s dance with death and give it it’s proper place in the scope of living.

    FWIW: There’s an interesting documentary produced in the mid-2000′s called, “Flight from Death: The Quest for Immortality” that touches on aspects of these issues.

  29. debrabradley says:

    Transparency. Publish the prices and other key information.

  30. victor says:

    My friend (70) was diagnosed with prostate cancer in CA. He was refused surgery in the UK (he has dual citizenship: US and UK) and in Norway (his wife has Norwegian citizenship). He was told: here we don’t operate on this type of cancer at your age, we just monitor its development and here are some pills (hormones) that we suggest you take. He had surgery in SoCal, the surgeon even preserved the nerve bundle responsible for his normal sexual activities….Cost: some $195,000 billed to Medicare. His copay after his supplemental AARP ins. kicked in: $2500.

    About death panels: I see a lot of “yes do it “on this blog. Sounds to me more like: yes, increase taxes/cut spending BUT NOT MINE.

  31. Patrick Neid says:

    From a technical point of view the chart has bubble dynamics written all over it. With that in mind I think it is a safe bet that the system will be collapsing in our lifetimes, assuming you are not over 70. As usual I doubt it will play out as anyone has mentioned and furthermore the powers that be will intervene all the way down making it worse than it has too be and preventing the medical market from finding a solution. My bet–ultimately I think we have to incentivize dying/dying with dignity.

  32. jus7tme says:

    >>my limited understanding is 1) torte reform and 2) controlling end of life care, would go a long way

    Wrong. Costs that can be either directly or indirectly attributed to Malpractice is less than 2.4% of total healthcare spending:

    Healthcare tort reform is a strawman and a smokescreen from right-wingers to crush the civil tort system (and the “trial lawyers” ) so that corporations can run rampant over product safety and corporate responsibility.

  33. DeDude says:

    And this is why you have to have mandatory universal health insurance. Only a very small number of people get really seriously ill (and praise yourself lucky for not being one of them). However, if you do end up with a very severe health problem, the cost of dealing with it is so high that nobody (but the top 0.1%) can afford to get proper care, unless they have insurance. People who have inadequate insurance (or none) almost always go bankrupt if hit by severe illness. Then they end up on public assistance and we all pay for them via our taxes anyway. Mandatory health insurance covered via taxes (to ensure affordability for all) is the only sensible system. The majority will end up paying much more than they get out (and should be grateful that they do). A small minority will use much more than they paid for, but will be spared the humiliation of being bankrupted and losing dignity, jobs, etc. before the taxpayers picks up the bills anyway.

    The fact that a lot of expenses accumulate in the last 6 months of life does not implicate that we do a lot of useless efforts. It simply means that the sickest (“expensive”) patients are also the most likely to die. You cannot predict which of those very sick people will pull through and survive, so it always will be an individual judgment whether it makes sense or not to do everything you can.

    I personally would not resist the idea that a public mandatory insurance had limits on coverage for certain procedures with questionable cost/benefit ratio. However, last time someone even suggested that people should be told that they did not have to accept life-prolonging procedures we had a moron chorus screaming about “death panels”.

  34. motfool says:

    Would disagree with DSS10 it is not the doctors its the patients.

    I see it all the time.

    69 year old with metastatic prostate cancer. Oncologist feels obliged to mention every possible treatment option so mentions a new drug that on average extends life for 2-3 months at a cost of $75000 (parlty out of fear of malpractice). Actually tried to down play the suggestion but the patient jumps on the idea is referred to a university hospital 25 miles away where he receives the treatment. The referring doctor does not get a penny out of the $75000 and transferred the patients care to the university hospital so absolutely no financial incentive for him.

    100 year old patient who is admitted to the hospital. Opens his eyes when talked too but no other social interaction. Is admitted to the hospital over 10 times in the past year. On this hospitalization he has a severe pneumonia. Despite the doctors encouraging the wife, 20 years his younger, to consider not connecting to a ventilator she disagrees. He is on the ventilator for over 2 weeks, the doctors get the hospital ethics team involved but wife says she wants everything done. He gets a feeding tube, tracheostomy tube (breathing tube into the trachea that allows the patient to come off the ventilator, and 1 month later is still in the hospital.

    The main areas where cuts can come are in:
    1. End of life care. Medicare should force all enrollees to have a living will. Family members do not want to be the decision maker to let their loved one go. If it is spelled out, the decision will be easier.

    2. Administration. Look at the following link. Go to the graph in the middle of page two that shows the growth in number of physicians versus administrators.
    Yes, there has been a 3000% percent increase in the number of administrators since 1970.

    3. Excessive tests ordered to limit malpractice. I agree it will not cut health care costs by 10% but even if it cuts 5% that would be tremendous savings to the system. (Remember, insurance companies make billions by taking 20% of the top). Most of these unneccesary tests are done by ER physicians who are not profiting from the tests so no it is not for purposes of profit.
    Every emergency room physician knows a colleague that has been sued for sending someone home who was later found to have a heart attack. Their solution……. just about everyone who comes to the ER and mentions chest pain, even if there is only a 1% chance of their pain coming from their heart or if it is not what they are even in the ER for, is admitted to the hospital.