Author: Scott Mayer, Director of Data Analytics at AP Benefit Advisors
In my conversations with self-insured employer groups, I always drive home the significance of managing high dollar claimants; before, during and even after their event or ongoing treatment. As it stands today, in our book of business, the top one percent of users now account for nearly one third of all medical and pharmacy claims. Let that sink in for a moment. In a population of 1,000 people, a mere 10 of them will consume a full third of all healthcare dollars.
Moving down the continuum, we are now at a point where the next four percent of members are now accounting for another third of all healthcare spending. We used to live by the 80-20 rule, but those days are long past us. Now we live by the Five – Two Thirds rule. Five percent of our population consumes two thirds of all healthcare dollars. In that population of 1,000 people, that means that 50 of them are eating up two thirds of our healthcare budget.
What is just as shocking is what we now see on the inverse. Seventy percent of the population, or 700 people in our fictional group, now account for roughly five percent of all claims. Think of it; in a population of 1,000 people, 700 of them account for what is essentially a rounding error of healthcare consumption, while just 50 people are creating a vast majority of the healthcare claims.
One has to wonder; why do we spend so much time focusing on that 70%? What is our goal within our population health programs as it pertains to that 70%? The “wellness” industry will tell us that our people will “graduate” from that 70% into our top 5% if left unchecked. Clearly, some will. After all, less than half our top claimants from this year will be our top claimants next year. But are they really going to go from spending virtually nothing on healthcare to costing over $100,000 a year just because they are not engaged in the wellness program?
The short answer is, “no.” What’s more, I decided that data would be a good tool to back up my assumption.
I took our sizable book of business and broke it down into 4 groups. Our top 1%, the next 4%, the 6th through 30th percent and our wonderful bottom 70% of all claimants. I utilized DxCG predictive modeling to identify what portion of the total claims dollars in each group was attributable to diabetes, cardio-pulmonary conditions, and cardiovascular conditions. The results are pretty staggering. I’ll spare you the numbers, but suffice it to say, it doesn’t seem to the naked eye that these popular targets for traditional wellness programs are such a big deal. In fact, in our entire population, Diabetes accounts for 5.2% of spend, while Heart Health accounts for 6% of spend.
Don’t get me wrong; 11.2% of plan spend is a good chunk, but how much of that can we expect to eliminate? Are we eliminating diabetes and heart disease entirely? Doubtful. I think even a great program could, at best, cut that number by a third. We’re talking maybe a 4% savings, and that’s under the best of circumstances.
I know what you will say…Diabetes and Heart Disease lead to other comorbidities and it is all part of a continuum. I agree. Diabetes and Heart Disease create higher risk, and higher risk means higher spend. But to what degree?
When I looked at the top 1% and parsed out the 88% of claims that were not heart disease or diabetes, I found some very interesting things: all types of cancer, chronic back/neck issues, congenital diseases, renal failure, shock trauma, childbirth complications, and substance abuse. Just as interesting, most of the largest claims would not be considered “preventable.” Certainly not by “wellness” standards. How do you prevent Lymphoma? How do you prevent a premature childbirth? How do you prevent Hemophilia, Rheumatoid Arthritis, Crohn’s, Muscular Dystrophy, Multiple Sclerosis or Cystic Fibrosis?
Certainly with some of these large items, such as cancer, promoting appropriate screenings and early detection is key. And yes, things like renal failure and osteoarthritis can be the result of lifestyle behaviors, but we are talking about decades of behaviors that cannot be changed in a three-year period because of biometric screenings and a walking challenge.
I am not saying that wellness programs are a waste of time. And I am not saying not to focus on diabetes or heart conditions as part of a population health management program.
What I am saying, is that you should fully understand what parts of your population and risk profile are really driving the bus when it comes to your largest claimants, both now and down the road. If you can manage that top 5% more efficiently, regardless of what they have going on, that’s where you are going to make a dent in your spend. And a one-size-fits-all solution will not get to the heart of the issues affecting your specific group.
For more information, contact firstname.lastname@example.org. The information contained in this post, and any attachments, is not intended and should not be misconstrued as legal advice. You should contact your employment, benefits or ERISA attorney for legal direction.
AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.