Healthcare Spending Frequency Impacts Affordability for Members

Whether care is affordable for members depends on more than just pricing; affordability is also tied to how clustered healthcare events—and, by extension, healthcare spending—are in a single year, according to a recent Health Affairs article.

The researchers relied upon data from the 2017 IBM MarketScan Commercial Claims and Encounters database to draw their conclusions.

For most commercial members who experienced out-of-pocket healthcare spending in 2017, 44 percent accrued costs over six months. Ten percent of commercial members with out-of-pocket healthcare costs had some healthcare spending each month.

Slightly more than a quarter of commercially insured Americans saw at least one month in which they spent a total of $400 in out-of-pocket healthcare spending. Unsurprisingly, hospitalizations boosted out-of-pocket healthcare spending.

On average, most members of commercial insurance plans engaged with the healthcare system for thirteen days over the course of the year.

Over eight in ten commercial members (83 percent) paid for their own healthcare costs to some degree, with an average annual cost-sharing amount of $954. Approximately 11 percent of commercial insurance members had zero engagements with the healthcare system. Six percent of commercial members had a single engagement but did not have to pay for it.

A clear pattern came to light: one or two engagements with the healthcare system was enough to accrue a strong portion of the member’s healthcare spending.

For around four in ten members, a single health system engagement was responsible for 50 percent of their annual out-of-pocket healthcare spending. Slightly more than a quarter of commercial member (26 percent) saw 90 percent of their out-of-pocket healthcare spending go towards just one or two health system engagements.

For members with half the average annual healthcare spending—who made up a little more than 40 percent of the study’s population—a third of them saw half of their out-of-pocket healthcare spending go towards one health system engagement.

A little over a third of commercial members who had low demand boasted zero cost-sharing, but 44 percent spent half of their 2017 out-of-pocket healthcare spending amount in one day.

At the other end of the spectrum, 49 percent of those who had higher spending accrued $400 in healthcare costs within one day and two-thirds of those with higher spending hit $400 or more in a month.

Less than one percent of the study’s population reached the individual health insurance out-of-pocket healthcare spending cap of over $7,000.

“Our analysis shows that temporal clustering of out-of-pocket spending is more common in patients with higher spending on health care services than on prescription drugs, and especially in those who were admitted to a hospital,” the researchers noted.

“This pattern is primarily driven by the fact that prescription drugs are often taken over time for management of chronic conditions, whereas hospitalizations are relatively sporadic. However, hospitalizations are also costly, and patients admitted for an inpatient stay have a high chance of reaching their deductible during the hospitalization.”

The researchers found three possible reasons for the pattern of clustered healthcare spending among commercial insurance members.

First, it was possible that the populace was generally healthy, needing only select services that were clustered together.

The pattern could also demonstrate the financial impact of delayed care or it could point to a trend in which members who meet their out-of-pocket maximums face low cost-sharing despite a high demand for care.

The researchers suggested that payers could address this issue by setting a lower deductible cap, although the researchers acknowledged that this would raise premiums. Payers could also carve out high-value care from deductibles through value-based care, but this could complicate payment for members.

Payers could restructure their approach to member payment by setting monthly, instead of annual, deductibles.

For instance, Blue Shield of California has attempted to streamline its billing process by allowing members to pay off medical bills over time instead of immediately.

The researchers also referenced the $35 flat cost for insulin as an example of how payers could  carve out certain necessary services from the deductible.

The study did not include out-of-pocket healthcare spending outside of administrative claims nor did it include employers’ contributions via health reimbursement arrangements or health savings accounts. Public payer beneficiaries and the uninsured were also left out of this study.

The conclusion of this study has clear implications for payers.

When members skip care due to affordability, they miss key preventive care services which can result in higher healthcare spending downstream in the members’ healthcare journeys. During the pandemic, payers have waived primary care costs in order to incentivize members to continue receiving care for this very reason.

The researchers called on payers, employers, and lawmakers to explore methods for spreading members' healthcare costs out over time.