Chronic Conditions are a Major Share of Health Spending
A chronic condition is a long-lasting condition that can be controlled but rarely cured, including conditions such as heart disease, cancer, diabetes, obesity and arthritis. Approximately one in two Americans live with at least one chronic condition. Of those, one fourth experience significant limitations in daily activities.
Chronic conditions account for an enormous share of American healthcare spending. Roughly 90 percent of total U.S. healthcare spending is used to treat patients with chronic and mental health conditions.1 Among the elderly, four of the five most expensive conditions to treat are chronic (heart disease, cancer, arthritis and pulmonary conditions).2
U.S. health spending is further concentrated among the 20 percent of Americans who live with multiple chronic conditions (MCCs). Americans with five or more chronic conditions, who make up 12 percent of the population, account for 41 percent of overall health spending.3 A person's risk of having MCCs increases with age: three in four Americans over 65 have MCCs, driving 93 percent of total Medicare spending.4
Cost per Case Drives High Spending
Research shows that the prevalence of chronic diseases has increased (particularly among Medicare beneficiaries), but that higher costs per treatment are driving higher spending, especially among the privately insured.5,6 One study that examined populations with chronic conditions found that three-fourths of the spending increase was attributed to the growth in cost per case, while one-fourth of spending growth resulted from increases in the number of people being treated. Another study found that rising costs associated with the care delivered in a hospital setting, specifically, accounts for ninety percent of per-case growth.7 Currently, the costliest one percent of U.S. patients receive approximately half of their care in hospital settings, and account for more than 20 percent of the nation's total medical spending.
Other factors driving the per-case spending increases include inflated unit prices, poor care coordination, waste in our healthcare system and expensive new treatments made available through technological advances.
While efforts to reduce the number of people who develop chronic conditions can impact health spending (particularly if directed towards the Medicare program), these efforts are unlikely to meaningfully lower the trajectory of overall healthcare spending growth. Rather, prevention strategies must be accompanied by cost-containment strategies to reduce the most substantial healthcare cost driver - rising unit prices.
Strategies to improve quality and minimize the inefficiencies can also lower costs by preventing expensive (and avoidable) readmissions. These patients require the most care, spend the most money and juggle multiple providers, medications and payers (e.g., Medicaid and Medicare). Currently, there are several initiatives attempting to addres this niche group, including Medicare Advantage Special Needs Plans, state alterations to Medicaid financing structures to accommodate these care models, Vermont's Blueprint for Health public-private initiative and private initiatives for care coordination system for people with disabilities.
Patient-centered care coordination or medical home programs support patients with chronic conditions in minimizing functional limitations and better managing their health. Additionally, making electronic health records interoperable improves care by allowing providers involved in a patient's treatment to share information and make better informed clinical decisions. Finally, remote monitoring systems can allow providers to more thoroughly monitor patients' health status and detect problems before or soon after they arise.
1. National Center for Chronic Disease Prevention and Health Promotion, Health and Economic Costs of Chronic Diseases (2019).
2. Soni, Anita, Top Five Most Costly Conditions among the Elderly, Age 65 and Older (2012): Estimates for the U.S. Civilian Noninstitutionalized Adult Population, AHRQ, Rockville, Md. (April 2015).
3. Buttorff, Christine, Teague Ruder and Melissa Bauman, "Multiple Chronic Conditions in the United States," RAND Corporation, Santa Monica, CA (2017).
4. Centers for Disease Control and Prevention, Mulitple Chronic Conditions (2018). https://www.cdc.gov/chronicdisease/about/multiple-chronic.htm
5. Keohane, Laura, et al., "Understanding Trends in Medicare Spending, 2007-2014," Health Services Research, Vol. 53, No. 5 (March 6, 2018).
6. Thorpe, Kenneth E., "Treated Disease Prevalence and Spending Per Treated Case Drove Most of the Growth in Healthcare Spending in 1987-2009," Health Affairs, Vol. 32, No. 5 (May 2013).
7. Starr, Martha, Laura Dominiak, and Ana Aizcorbe, "Decomposing Growth in Spending Finds Annual Cost of Treatment Contributed Most to Spending Growth, 1980-2006," Health Affairs, Vol. 33, No. 5 (May 2014).