care or are at risk for very high costs relative to their incomes in the event of a significant health event?

The same questions apply to those with public or private insurance with policies that would provide inadequate protection in the event of a major health event, either because of very high cost-sharing, limits on the total amount the insurance will pay, or gaps in essential benefits. A measure of medical care economic risk is needed to assess the exposure to, or potential for, incurring expenses in the future.

This is especially true because of the skewed nature of medical care costs. Each year the sickest 10 percent of the population accounts for about two-thirds of all spending, and the sickest 5 percent accounts for about half of total spending. At the same time, the healthiest half of the population accounts for just 3 percent of total spending (see Figure 2-4). The spending levels for each of the groups, not surprisingly, are very different: among the sickest 1 percent in 2009, each person spent more than $50,000, with an average of $90,000. In contrast, the healthiest half of the population spent $850 or less in 2009. Analysis over time indicates that a significant share of the sickest people remain “sick” in the following year—about 40 percent of the top 10 percent are in this group the following year. However, there is also substantial movement, as any major health event results in a shift in spending levels (Cohen and Yu, 2012).


FIGURE 2-4 Health care costs concentrated in sick few—sickest 10 percent account for 65 percent of expenses.
NOTE: The means are for the respective percentiles up to that value. Thresholds indicate dividing points between groups.
SOURCE: Analysis of MEPS, S. Cohen, Agency for Healthcare Research and Quality, for NAS Panel Report, April 13, 2012.

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