High Cost Healthcare Claimants

This video provides an in-depth exploration of the primary driver of high healthcare costs in employer-sponsored health plans: high-cost claimants. Dr. Eric Bricker, the speaker, begins by establishing the context that anyone involved in managing a health plan budget must constantly focus on these individuals. He highlights the well-known 80/20 rule, where 80% of healthcare costs are driven by just 20% of claimants (typically those exceeding $25,000 annually), and further emphasizes the 5/50 rule, where 50% of costs come from the top 5% of claimants (those over $100,000 per year). The core message is that addressing overall healthcare costs is impossible without directly confronting the issue of high-cost claimants.

The presentation then delves into categorizing high-cost claimants, first by their primary diagnostic areas and then by their claims patterns. Dr. Bricker identifies three major diagnostic categories: musculoskeletal (MSK), cardiovascular, and cancer. He provides important nuances, such as including "injury and poisoning" within MSK for a more accurate spend analysis, and expanding "cardiovascular" to encompass diabetes and renal failure, as these often stem from the same underlying vascular pathologies. He stresses that daily attention to these three categories is crucial for effective cost management.

Following the diagnostic breakdown, the video introduces a critical framework for understanding the heterogeneity of high-cost claimants, noting that two-thirds of them are new each year. Dr. Bricker outlines three distinct claims patterns: "The Explosion," representing about 50% of new high-cost claimants, characterized by sudden, catastrophic events with little to no prior claims (e.g., heart attack, stroke, new cancer diagnosis); "The Ramp-Up," accounting for approximately 17% of high-cost claimants, showing a gradual increase in costs over time (e.g., progression to dialysis for end-stage renal disease); and "The Continuation," making up about 33% of high-cost claimants, who were high-cost in the previous year and remain so (e.g., cancer recurrence, congestive heart failure, complex surgical complications). He concludes by discussing the three ways claimants exit the high-cost category: leaving the plan, expiring, or resolving their condition.

Key Takeaways: • High-Cost Claimants Drive the Majority of Healthcare Costs: A disproportionate amount of healthcare spend is concentrated in a small percentage of claimants. Specifically, 80% of costs are driven by 20% of claimants (typically >$25K/year), and 50% by just 5% of claimants (typically >$100K/year). This concentration necessitates a focused strategy. • Primary Diagnostic Categories: The vast majority of high-cost claims fall into three main diagnostic areas: Musculoskeletal (MSK), Cardiovascular, and Cancer. Employers and benefits managers must prioritize understanding and addressing these specific health challenges. • MSK Spend Includes Injury: When analyzing musculoskeletal costs, it's crucial to include "injury and poisoning" diagnostic codes, as many long-term musculoskeletal issues are categorized under injury, which can be overlooked if only "MSK" codes are considered. • Cardiovascular Spend Encompasses Diabetes and Renal Failure: Cardiovascular costs extend beyond direct heart and stroke events to include diabetes and kidney failure. These conditions share common vascular damage pathologies, making their management integral to a comprehensive cardiovascular health strategy. • Three Distinct Claims Patterns: High-cost claimants are not a homogeneous group but follow three patterns: "The Explosion" (sudden, catastrophic events with no prior claims, ~50% of new high-cost claimants), "The Ramp-Up" (gradual increase in costs over time, ~17%), and "The Continuation" (ongoing high costs from previous years, ~33%). • Challenges in Predicting "The Explosion": Claims analytics are ineffective for "Explosion" type claimants because they have no prior claims data to analyze. This highlights a significant limitation of retrospective data analysis for a large segment of high-cost events. • Primary Care as a Solution for "The Explosion": For "Explosion" claimants, the most effective intervention is robust primary care. This can be delivered through various models (onsite, nearsite, direct primary care, virtual) and is essential for early detection and prevention before catastrophic events occur. • Proactive Intervention for "The Ramp-Up": Claims analytics are highly effective for identifying "Ramp-Up" claimants, such as those progressing towards renal failure due to diabetes or hypertension. Employers should aim for 100% identification of these individuals to enable timely and impactful interventions. • Ongoing Management for "The Continuation": Claimants in "The Continuation" category require sustained management and support due to chronic or recurring conditions like cancer recurrence, congestive heart failure, or complications from previous surgeries. • Two-Thirds of High-Cost Claimants are New Annually: The majority of high-cost claimants (two-thirds) are new each year, meaning strategies cannot solely focus on existing high-cost individuals but must also account for continuous new entries. • Cut Through Distractions: Benefits managers, HR, and CFOs must resist getting sidetracked by numerous health plan distractions (plan design, compliance, employee complaints, data issues) and maintain a daily focus on addressing high-cost claimants. • Claimant Exit Strategies: High-cost claimants exit the category through three main avenues: leaving the health plan (e.g., employee changes jobs), expiring, or resolving their medical condition (e.g., successful cancer treatment, kidney transplant).

Key Concepts:

• High Cost Claimants: Individuals whose healthcare claims exceed a specific annual financial threshold (e.g., $25,000 or $100,000), accounting for a disproportionately large share of total healthcare expenditures.
• 80/20 Rule (Pareto Principle): A general rule stating that roughly 80% of effects come from 20% of causes. In healthcare, this means 80% of costs are driven by 20% of claimants.
• 5/50 Rule: A more extreme variant of the Pareto Principle, indicating that 50% of healthcare costs are driven by just 5% of claimants.
• Diagnostic Categories: Broad medical classifications used to group similar conditions, which in this context, highlight the primary areas of high healthcare spend (MSK, Cardiovascular, Cancer).
• Claims Patterns: Distinct trajectories of healthcare utilization and cost accumulation over time, categorized as "The Explosion," "The Ramp-Up," and "The Continuation."
• Primary Care: Comprehensive, first-contact healthcare that focuses on prevention, early detection, and management of common health problems, crucial for mitigating "Explosion" type high-cost events.

Examples/Case Studies:

• "The Explosion" Examples: Heart attack, stroke, or a new cancer diagnosis in an otherwise healthy individual (e.g., a 45-year-old with metastatic colon cancer appearing suddenly).
• "The Ramp-Up" Examples: The progressive decline of kidney function leading to dialysis for End-Stage Renal Disease, often secondary to long-standing diabetes and hypertension.
• "The Continuation" Examples: Recurrence or metastasis of cancer, ongoing management of congestive heart failure, complications from unsuccessful spine surgery, or the need for revision surgeries for joint replacements.