Says "80 percent of the health care dollars are spent by 20 percent of the population."
Alan Bates on Tuesday, February 14th, 2012 in a floor speech.
Does 20% of the population really use 80% of health care dollars?
Health care debates are always fertile ground for fact-checkable claims. A recent debate on the Oregon Senate floor over the state’s reform plans was no different.
During the debate, Sen. Alan Bates was trying to argue the point that the state’s health care system needs to focus on the folks who are highest cost and better integrate their care. A small portion of folks use the most resources, he said, so better organization, more working together, should make a dent in overall costs.
"We spend twice as much money per person in the U.S. than any industrialized country in the world and yet we have the worst outcomes," he said. "Our health care system is literally awash in dollars."
Same old, same old. But then he said something that really caught our attention: "Eighty percent of the health care dollars are spent by 20 percent of the population."
We remembered this 80-20 rule from economics class. Quite a few things are said to split that way. Business owners, for instance, sometimes say that just 20 percent of their clientele account for 80 percent of their sales.
But we hadn’t heard the rule applied to health care -- and, honestly, we weren’t even sure the "rule" held up to scrutiny.
So we gave Bates’ office a call. An aide there said that the 80-20 split was general knowledge, and that the senator heard it recently from the director of the Oregon Health Authority. That led us to OHA spokeswoman Karynn Fish, who pointed us to two sources. The first was an Oregonian article by Bill Graves that was about this topic exactly: high-cost patients.
In his story, Graves notes that at CareOregon, a Portland managed care organization for Oregon Health Plan, about 25 percent of the adult patients accounted for 83 percent of the spending in 2011. That number seemed to reflect the same general principle Bates had mentioned during the floor session.
Debra Read, a senior evaluation associate with CareOregon, said the figure was fairly standard across the board when it comes to health care -- though she couldn’t say whether it also applied to children. "That’s well supported, not just in our data."
The reason for the high cost of a few, she said, comes down to hospital visits, where most people wind up when they’re managing a chronic condition or they’re in the last stages of a terminal illness. "When you look at health care costs overall, the hospital is the thing that costs the most, vastly costs the most. … So it’s basically driven by hospital costs. The sicker you are, the more likely you are to go to the hospital."
The second source that Fish gave us was a chart from the U.S. Department of Health & Human Services’ Agency for Healthcare Research and Quality. That chart showed exactly what Bates said: Twenty percent of the population accounts for 80 percent of total expenditures. Maybe even more shockingly, the chart also shows that just 5 percent of the population accounts for 50 percent of all expenditures.
The agency cited several studies for the chart, with publication dates running from 2002 through 2006. To get a more current take on the situation, we phoned Stephanie Bernell, a professor with Oregon State University’s Health Management and Policy Program who specializes in the economics of health care.
She said the 80-20 split was "a very reasonable thing for somebody to say." She cited a fuller report from the Agency for Healthcare Research and Quality that further explored the way in which a minority of Americans account for the largest bulk of spending.
Bernell said she was even more interested in whittling down that 20 percent, noting again that just 5 percent account for 49 percent of health care expenses. "I think the stories are more interesting when you get into who’s in that 20 percent, " she said.
People consume the most health care at the beginning and the end of life, she said. Births are expensive and so is the latter part of life when "chronic conditions start to creep up."
That brings us to our ruling. Bates said that 20 percent of the population accounts for 80 percent of the health care dollars spent. His claim is backed up by two studies from the Agency for Healthcare Research and Quality. That data is a little old, but newer numbers from CareOregon show the same split and a professor who studies the issue also confirmed the senator’s claim. We give this statement a True.