The Insane Cost of Diabetes on Healthcare Spend

This video provides an in-depth exploration of the escalating financial burden of diabetes on healthcare spending, particularly from the perspective of employers managing insurance costs. The discussion, featuring Preston Pomykal, highlights that while medical inflation (or "trend") is a factor, the dramatic increase in disease prevalence—specifically diabetes—is the primary driver behind the skyrocketing costs. The speaker emphasizes that traditional cost-containment strategies, such as reference-based pricing or contractual language adjustments, offer only a temporary "bite of the apple" and do not address the root cause of the problem.

The core of the discussion revolves around a stark comparison of diabetes statistics over the past 25 years. The speaker, drawing on his experience as an underwriter, illustrates how the average diabetic rate in an insured population has quadrupled, moving from an estimated 3-4% a quarter-century ago to 12-13% today. This trend is projected to continue, potentially reaching 20% by 2025. Concurrently, the average annual cost per diabetic has more than doubled, from approximately $10,000 to $21,000.

Through a simple yet powerful calculation, the speaker demonstrates the combined effect of increased prevalence and medical inflation. For a hypothetical group of 100 people, the cost associated with diabetes has surged from $30,000 (3 diabetics at $10,000 each) 25 years ago to an astounding $252,000 today (12 diabetics at $21,000 each). This represents an eight-fold increase in costs, primarily driven by the four-fold increase in disease prevalence. The central argument presented is that while everyone focuses on "trend, trend, trend" and medical inflation, the more critical and impactful strategy for employers and the healthcare system at large is to "produce less disease." This paradigm shift from managing costs to preventing illness is presented as the ultimate solution for achieving sustainable healthcare savings and improving population health.

Key Takeaways:

• Diabetes Prevalence is a Primary Cost Driver: The video strongly argues that the dramatic increase in diabetes prevalence, rather than just medical inflation, is the leading cause of escalating healthcare costs for employers.
• Historical vs. Current Prevalence: Approximately 25 years ago, the average diabetic rate in an insured population was 3-4%; today, it stands at 12-13%. This represents a significant quadrupling of the affected population.
• Projected Future Prevalence: Experts project that the diabetic rate could reach 20% by 2025, indicating a worsening trend that will further exacerbate healthcare spending.
• Combined Impact of Prevalence and Inflation: While the cost per diabetic has doubled from $10,000 to $21,000 over 25 years, the four-fold increase in prevalence means the total cost for a group of 100 people has increased eight-fold (from $30,000 to $252,000).
• Limitations of Traditional Cost Containment: Strategies like reference-based pricing and adjusting contractual language offer only marginal, short-term savings and do not address the underlying issue of increasing disease burden.
• Focus on "Affecting Risk": Employers, especially small groups pooling resources, must shift their focus from merely managing insurance costs to actively "affecting risk" within their employee population, meaning reducing the incidence of chronic diseases.
• The Overlooked Factor of "Utilization": The speaker highlights that while medical inflation ("trend") is often emphasized, the "utilization" of healthcare services due to increased disease prevalence is the more impactful and often overlooked factor driving costs.
• Strategic Shift to Disease Prevention: The ultimate and most effective strategy for sustainable healthcare cost reduction is to "produce less disease." This implies a move towards preventative health, wellness programs, and interventions that reduce the incidence of chronic conditions like diabetes.
• Employer Ecstasy through Disease Reduction: The video concludes that if the healthcare system and employers could collectively reduce the prevalence of diseases, it would lead to significant financial relief and positive outcomes for all stakeholders.
• Implications for Life Sciences: The insights underscore the critical need for pharmaceutical and biotech companies to develop not only effective treatments but also preventative solutions and data-driven approaches that can help manage and ultimately reduce disease prevalence within populations.

Key Concepts:

• Trend (Medical Inflation): Refers to the increase in the cost of medical services and goods over time.
• Utilization: Pertains to the frequency and extent to which healthcare services are used, often directly correlated with the prevalence of disease within a population.
• Affecting Risk: A strategic approach focused on reducing the health risks within a population, thereby decreasing the likelihood of costly medical conditions.