Chronic Illness Accounts for 75 Percent of Health Spending

The closely watched annual health spending figures released today by the federal government were published, fittingly enough, in the January/February issue of the journal Health Affairs. Fittingly, because this month's issue is devoted to chronic illness, and about 75 percent of the $2.2 trillion the United States spends on healthcare goes toward treating chronic conditions like diabetes, heart disease, and cancer. That $2.2 trillion works out to $7,421 per person. The out-of-pocket cost, which is what individuals are most concerned about, comes to $889 apiece, 5.3 percent higher than it was in 2006, according to the Centers for Medicare and Medicaid Services, which released the figures.

That overall out-of-pocket spending figure is interesting, but how does it vary if someone has a chronic condition, as nearly half of people do? A study in the same Health Affairs issue reports that people with one chronic condition spent an average $655 out of pocket in 2005, while those with two chronic conditions spent $1,039, and those with three or more spent $1,865. While it's true that many people, especially elderly ones, have more than one chronic condition to contend with, lumping together costs faced by cancer patients with those who have much less expensive conditions like high blood pressure isn't all that helpful.

As it turns out, disease-specific details are awfully hard to come by. Rand researchers examined private insurance claims for 55 health plans in 2004 and reported average annual out-of-pocket medical and drug costs for four chronic conditions. Here's what they found:

• Kidney disease: $8,878
• Cancer: $8,411
• Rheumatoid arthritis: $4,811
• Multiple sclerosis: $3,301

But that doesn't tell us anything about out-of-pocket costs for the most common chronic conditions: diabetes, hypertension, and high cholesterol.

The American Diabetes Association reports that in 2005, someone with moderate type 2 diabetes might rack up $9,646 in medical costs for insulin and other medications, blood-glucose testing equipment and supplies, and physician visits. But that figure represents total costs, not out-of-pocket expenses. If you have insurance, some portion of that total—perhaps a large portion—will be covered, and your out-of-pocket costs may be significantly lower than that total.

Likewise, a middle-aged person with easily controlled high blood pressure or high cholesterol might face virtually no out-of-pocket costs to treat his or her condition, says Robert Bonow, chief of cardiology at Northwestern Memorial Hospital in Chicago and past president of the American Heart Association. A 30-day supply of 20-milligram tablets of lisonopril, a generic ACE inhibitor, runs just $13.99 on drugstore.com, for example. Simvastatin, the generic version of the lipid-lowering statin Zocor, costs $27.99 for a 30-day supply of 40-mg tablets.

Of course, out-of-pocket costs can swing widely in either direction depending on the severity of the illness and the coverage provided by the insurance policy, among other factors. What the averages don't show us is that "there are people out there, maybe 10 percent of them, who will have significant out-of-pocket costs," says Geoffrey Joyce, a senior economist at Rand and coauthor of the Rand study mentioned above.