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Health Care Costs and Financing

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U.S. health care spending has become less concentrated among the top spenders in the past decade

Historically, a small fraction of the U.S. population has accounted for a large share of total health care spending. However, this concentration in health care spending has begun to decline, according to a study of 1996-2003 Medical Expenditure Panel Survey (MEPS) data. For example, up until 1996, the top 1 percent of spenders accounted for more than one-fourth of all health care expenses and the top 5 percent accounted for more than half. Yet, by 2003, the percentage of expenditures accounted for by the top 1 percent of spenders declined from 28 to 24 percent and those of the top 5 percent declined from 56 to 49 percent. These declines were evident among both elderly and nonelderly groups and both the publicly and privately insured.

Rapid growth in prescription drug spending combined with slower growth in inpatient care spending largely accounted for this change in concentration of spending, note Samuel H. Zuvekas, Ph.D., and Joel W. Cohen, Ph.D., of the Agency for Healthcare Research and Quality. Prescription drug spending, which is diffused over a large fraction of the population, increased from 12 to 20 percent of total health care expenditures.

In contrast, inpatient care spending (usually by the sicker and smaller segment of the population) declined from 39 to 34 percent of total expenditures. From 1996 to 2003, prescription drug spending per person more than doubled (125 percent increase) from $424 to $950, while inpatient (12 percent), ambulatory (23 percent), and other medical services spending (19 percent) increased only modestly.

The concentration of prescription drug and ambulatory treatment spending declined at the same time. For example, the top 10 percent of drug spenders accounted for 66 percent of spending in 1996, but 64 percent in 2003. The top 5 percent of ambulatory care spenders accounted for 54 percent of expenditures in 1996, but only 48 percent in 2003.

More details are in "Prescription drugs and the changing concentration of health care expenditures," by Drs. Zuvekas and Cohen, in the January 2007 Health Affairs 26(1), pp. 249-257.

Reprints (AHRQ Publication No. 07-R031) are available from the AHRQ Publications Clearinghouse.

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