What conditions contribute the most to U.S. health care spending?

One of the coolest research papers published in recent years

If you are interested in health care services, health tech, and health policy; this is a great article for you. In this, I will summarize a research paper that breaks down U.S. health care spending by condition and condition type. It is without a doubt one of the most interesting studies published in the last five years due to its comprehensive view of U.S. health spending. The methods are cool too, but the tables and charts are worth your time.

The research paper published in JAMA by Dieleman et al. provides a detailed analysis of U.S. health care spending trends over a 21-year period (1996-2016), breaking down expenditures by health condition, payer type, and demographic factors. This extensive study offers critical insights into how the American health care system distributes its resources and how these patterns have evolved over time.

Key Findings: The Changing Landscape of Health Care Spending

Total U.S. health care spending increased dramatically from $1.4 trillion in 1996 (13.3% of GDP) to $3.1 trillion in 2016 (17.9% of GDP). This reflects a per-person increase from $5,259 to $9,655 annually. The study examined 85.2% of this total health care spending, providing an unprecedented level of detail about where these resources were allocated.

By 2016, the distribution of health care spending among payers was:

• Private insurance: 48.0%

• Public insurance (Medicare, Medicaid, and other government programs): 42.6%

• Out-of-pocket payments: 9.4%

This represents a significant shift, with the fastest growth occurring in public insurance expenditures. After adjusting for inflation, population size, and age, public insurance spending grew at an annualized rate of 2.9%, compared to 2.6% for private insurance and just 1.1% for out-of-pocket payments.

The Top Health Conditions Driving Costs

The study identified the health conditions accounting for the highest spending in 2016:

1. Low back and neck pain: $134.5 billion

2. Other musculoskeletal disorders: $129.8 billion

3. Diabetes: $111.2 billion

4. Ischemic heart disease: $89.3 billion

5. Falls: $87.4 billion

6. Urinary diseases: $86.0 billion

7. Skin and subcutaneous diseases: $85.0 billion

8. Osteoarthritis: $80.0 billion

9. Dementias: $79.2 billion

10. Hypertension: $79.0 billion

Interestingly, the top conditions varied significantly by payer type. For public insurance, diabetes ($55.4 billion) and ischemic heart disease ($48.2 billion) ranked highest. Private insurance spent most on low back and neck pain ($76.9 billion) and other musculoskeletal disorders ($73.3 billion). For out-of-pocket spending, oral disorders ($30.5 billion) and dental care ($21.1 billion) topped the list.

This checks out given my personal experience with dentists.

Age and Sex Patterns in Health Care Spending

The study revealed distinct patterns in health care spending across age groups and between sexes:

• Public insurance spending: Primarily concentrated (58.6%) among those aged 65 years or older, reflecting Medicare eligibility, though a substantial 41.4% went to those younger than 65 (i.e., Medicaid).

• Private insurance spending: Predominantly (86.0%) focused on those younger than 65 years of age.

• Out-of-pocket payments: Remained relatively consistent across age groups but reached their highest percentage (12.8%) among those 85 years or older. End of life care, long-term care, and health conditions associated with aging likely contribute to this observation.

For certain conditions, spending varied markedly between men and women. Other musculoskeletal disorders showed higher spending for women, particularly between ages 40-70, partly due to the inclusion of osteoporosis. Similarly, for dementias, spending was substantially higher for older women than men, largely because women typically live longer and are less likely to have in-home caregivers, resulting in higher nursing facility costs.

Spending by Type of Care

When examined by care setting, the distribution of payments showed distinct patterns:

• Ambulatory care: 53.7% was paid by private insurance, with public insurance increasing from 33.1% (1996) to 39.6% (2016).

• Inpatient care: 48.8% was covered by public insurance, with minimal out-of-pocket payments (4.2%).

• Emergency department: 47.7% was funded by public insurance, with only 4.5% coming out-of-pocket.

• Prescribed pharmaceuticals: While 49.1% was paid by private insurance across all years, public insurance's share increased dramatically from 19.1% (1996) to 40.6% (2016), largely due to the implementation of Medicare Part D.

• Nursing care facilities: 57.8% was covered by public insurance.

• Dental care: Only 7.7% was paid by public insurance, highlighting a significant coverage gap. Medicare and Medicaid seldom cover dental care, although the movement toward Medicaid coverage of dental services is growing.

Conditions with Highest Growth in Spending

After adjusting for changes in population size and age, 108 of the 154 health conditions (70.1%) showed increased spending between 1996 and 2016. The conditions with the most rapid growth in public insurance spending (among those with at least $10 billion in spending) were:

1. Rheumatoid arthritis (10.7% annual growth)

2. Hyperlipidemia (9.3%)

3. Multiple sclerosis (8.8%)

For private insurance, the fastest-growing conditions were:

1. HIV/AIDS (10.8%)

2. Indirect maternal complications due to preexisting conditions (10.8%)

3. Multiple sclerosis (10.8%)

For out-of-pocket payments, the highest growth rates were seen in:

1. Hemoglobinopathies and hemolytic anemias (18.3%)

2. Non-Hodgkin lymphoma (12.7%)

3. Rheumatoid arthritis (11.2%)

Broader Context and Implications

Several key observations emerge from this comprehensive analysis:

1. Musculoskeletal conditions dominate spending: Low back and neck pain plus other musculoskeletal disorders account for the two highest spending categories, with a combined cost of over $264 billion in 2016.

2. Rising costs for chronic conditions: The substantial increases in spending for conditions like diabetes and dementias highlight the growing burden of chronic diseases on the healthcare system.

3. Specialty drug impact: Conditions with the introduction of specialty drug treatments during the study period (hepatitis, rheumatoid arthritis, multiple sclerosis, osteoarthritis) showed some of the highest increases in healthcare spending.

4. Differential growth rates: The faster growth in public insurance spending compared to private insurance has significant implications for future health care financing, especially as the population continues to age.

5. Low back pain spending concerns: The study raises particular concerns about spending on low back and neck pain, which increased by 6.7% annually despite only a 1.1% annual increase in prevalent cases and a 1.3% increase in health burden. This suggests possible inefficiencies in treatment approaches, especially considering efforts to reduce unnecessary testing and evidence that newer, more expensive therapies may not be more effective than traditional, lower-cost treatments.

Study Limitations

The authors acknowledge several limitations to their analysis:

1. The data sources exclude certain populations (active military, incarcerated individuals, homeless people).

2. The study couldn't delineate spending by geographic region, income, race, or education level.

3. It doesn't separately analyze spending for Medicare versus Medicaid within the public insurance category.

4. The study doesn't evaluate the efficiency or effectiveness of spending.

5. Due to data availability, the analysis extends only through 2016 and was already three years out of date at publication.

Conclusion and Significance

This study provides unprecedented insight into how different payers contribute to health care spending across various conditions, age groups, and care settings. The findings reveal substantial increases in U.S. health care spending from 1996 to 2016, with the highest growth rate in public insurance spending.

The research highlights that while low back and neck pain, other musculoskeletal disorders, and diabetes account for the largest portions of health care spending, both the payers and growth rates vary considerably across conditions. This granular understanding of health care spending trends can inform policymakers, insurers, health care systems, and researchers in efforts to address healthcare costs while improving outcomes.

As health care costs continue to rise and demographic shifts increase demands on public insurance programs, this detailed mapping of expenditures provides crucial context for ongoing policy debates about health care financing and delivery system reform in the United States.