New Marketplace
Navigating Payment Reform

Consistently High Turnover in the Group of Top Health Care Spenders

Article · February 1, 2018

The concentration of most U.S. health care spending in a small proportion of individuals is well documented. The notion that high health care spending only affects a small portion of people in a given year is particularly relevant to the ongoing policy debate about how to make health insurance affordable for all, while accommodating people with complex health care needs and accompanying higher costs. The distribution of health care spending is directly related to the solvency of insurance markets in which adverse selection may occur, and whether models like high-risk pools and reinsurance can be effective stabilization tools.

To better understand the patterns of spending for higher-risk enrollees, the Health Care Cost Institute studied the distribution of health care spending among commercially insured individuals and how their spending changed over time. Specifically, we analyzed the annual health care spending of more than 9 million individuals under the age of 65 in each pair of years from 2008 to 2015. Because people may change insurers over time, within each pair of years we limited our sample to people with continuous enrollment and prescription drug coverage for the full 2 years. We found that top spenders (the top 5%) account for a growing share of health care spending, and there is consistent and substantial turnover among these top spenders.

Taken together, we interpret these findings as evidence that as costs continue to rise, health insurance will play an increasingly important role in easing the financial burden of increased health care spending. For this reason, less comprehensive plans may be risky, even for consumers with low health care spending in previous years. These findings provide a timely reminder of the inherent uncertainty in health care spending in light of proposals to create significant changes in individual and group insurance markets, such as altering consumer protections created by the Affordable Care Act.

Within a Given Year, Small Proportion of Population Accounts for Majority of Health Care Spending

In 2015, the top 5% of spenders accounted for 53% of health care spending. By comparison, the bottom 50% of spenders accounted for just 4% of health care spending, and almost 13% of our sample had no spending at all. This concentration of health care spending is consistent with findings from numerous studies. The median member of the top 5% accounted for $39,409 in total spending in 2015 (payer spending plus out-of-pocket spending), with a median out-of-pocket burden of $3,850.

The concentration of health care spending among top spenders has also increased over time. The share of total spending by the top 5% steadily grew over our study period, rising from 48% in 2009 to 53% in 2015. The increased concentration is a result of faster spending growth by top spenders. Per capita spending by the top 5% of spenders grew at an average of 5% per year from 2009 to 2015, compared to an average of 3% per year for all spenders.

The implication is that both health care spending and the growth in health care spending are concentrated in a relatively small minority of individuals. These findings, consistent with existing literature, support the notion that a better understanding of health care spending and utilization of the top 5% of spenders is an important starting point to manage outcomes for this population — and that successes in that effort have the potential to meaningfully impact total spending.

Volatility Among Top Health Care Spenders

  Click To Enlarge.

Large Degree of Turnover from Year to Year among Top Spenders

Simply put, three out of five top spenders in any given year were not top spenders in the prior year. In 2015, only 39% of the top 5% of spenders were in the top 5% of spenders in 2014. Moreover, this trend was consistent in each year from 2009 to 2015. These new top spenders came from all portions of the spending distribution. For example, in each year studied, almost 15% of top spenders were in the bottom 50% of spenders or had no spending in the previous year.

People who are new to the top 5% of spenders endure dramatic changes in their health care spending within a short period of time. The median newly top spender saw their total health care spending rise almost 800% from $4,528 in 2014 to $35,523 in 2015. While insurance plans insulated them from most of this spending increase, median out-of-pocket spending for this group also rose nearly 400% from $1,048 in 2014 to $4,067. These year-to-year changes in out-of-pocket spending are particularly jarring considering the Federal Reserve Board’s 2016 Survey of Household Economics and Decision, which reported that 44% of respondents could not afford a $400 emergency expense.

Turnover of Top Spenders Demonstrates Role of Health Insurance in Smoothing Financial Risk

In any given year, high health care spending affects only a small portion of the population. However, it would be an oversimplification to conclude that healthy consumers should view robust health insurance coverage as necessary only for the already sick. The consistent and substantial turnover in the top 5% of spenders provides evidence that high health care spending annually affects new people. For newly top spenders, health insurance plays a role in blunting exposure to total spending increase. Even though newly top spenders had substantial increases in their out-of-pocket spending, health insurance covered over 90% of the increase in spending.

New call for submissions ­to NEJM Catalyst

Now inviting longform articles


A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »

More From New Marketplace
Elements of a Sustainable Complex Care Management Contract

Sustainable Financing for Complex Care Management Is Critical to a Value-Driven Health Care System

Care management should be payer-agnostic at its core.

Comparison of Certain Model Features in Blue Cross NC Blue Premier vs Next-Generation ACO Model vs BCBSMA Alternative Quality Contract

Engineering a Rapid Shift to Value-Based Payment in North Carolina: Goals and Challenges for a Commercial ACO Program

We believe North Carolina can be a model for the nation.

Small Molecule Drugs Facing Generic Competition - Orphan and Non-Orphan Drugs - Orphan Drug Act

It’s Time to Reform the Orphan Drug Act

Three proposals for improving the law to reflect 21st-century drug development practices.

Three-Part Pricing of PCSK9 Inhibitors

A New Model for Pricing Drugs of Uncertain Efficacy

Are we paying too much for new drugs before we know how well they work? This innovative pricing model proposes postponing major rewards until efficacy is established — which could help both patients and payers while still paying back investments on the most effective drugs.

what does quality measurement in health care mean

Buzz Survey Report: Addressing the Problems of Quality Measurement

An independent NEJM Catalyst report sponsored by University of Utah Health on patient involvement in quality measurement.

Average HOOS and Average KOOS for patients undergoing hip and knee replacement at CJRI

Building a “Hospital-within-Hospital” Model for Joint Replacements

The Connecticut Joint Replacement Institute has demonstrated that formerly competing independent providers can unite on a common vision to yield drastic improvements in quality, safety, and costs.

Discharge Rates and Follow-Up Internval Dashboard for One Provider at MGH Dermatology

A Successful Pilot to Improve Access by Adjusting Discharge and Follow-Up Rates

Actionable data and modest financial incentives can help motivate clinicians to adjust their behavior around scheduling follow-up appointments.

Cautious Optimism That Value-Based Reimbursement Will Become Primary Revenue Model

Survey Snapshot: What Would Accelerate the Adoption of Value-Based Care?

NEJM Catalyst Insights Council members weigh in on the barriers and path forward to value-based health care.

Strongwater08_pullquote primary care value proposition and disruptive innovation

The Evolution of Primary Care: Embracing Innovation While Protecting the Core Value

Primary care must leverage disruptive innovations to ensure that patients receive first-access, comprehensive, coordinated, continuous care that is woven into a seamlessly integrated system.

Berns01_pullquote nephrologists dialysis facility joint venture conflicts of interest

Dialysis-Facility Joint-Venture Ownership — Hidden Conflicts of Interest

Despite potential benefits, joint ventures between nephrologists and dialysis companies raise legal and ethical concerns because of participants’ conflicts of interest and lack of transparency.


A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »


Value Based Care

199 Articles

Curbing Health Care Spending: The Provider’s…

Health care costs have historically grown at about 2% faster than income in the United…

Medicare and Medicaid

122 Articles

A Collaborative Model to Expand Medicaid…

How managing the benefit coverage expansion for the treatment of HCV in New Mexico was…

Vertical Integration and Bold Experimentation

Four points on improving value in health care via vertical integration and aggressive experimentation.

Insights Council

Have a voice. Join other health care leaders effecting change, shaping tomorrow.

Apply Now