The 80/20 Rule"Chronically" not accurate anymore

You have undoubtedly heard of the 80/20 rule, where 80 percent of the results are typically produced by the top 20 percent of your people. Previously, this rule seemed to hold true in many areas, including medical claims. Eighty percent of your medical claims costs were caused by 20 percent of your employees.
However, based on the following facts 1, the old 80/20 rule is no longer the current standard for medical claims.

• In 2014 and 2015, approximately 60 percent of the population spent less than $999 annually and accounted for less than 4 percent of overall expenditures.
• Groups of people spending between $5,000 and $50,000 accounted for 85 percent of the overall expenditure for 2014 and only 16.8 percent of the population accounted for this expense.
• A recent study in the Journal of the American Medical Association analyzed the increase in health care spending in the U.S. from 1996 to 2013. The study concluded that health care spending was impacted most by seven conditions:

1. Diabetes
2. Hypertension
   
3. Hyperlipidemia (high cholesterol)
   
4. Low back and neck pain
   
5. Depressive disorders
   
6. Other neurological disorders
   
7. Falls
   

• Combinations of chronic diseases, such as diabetes and hypertension (termed comorbidity), increase the medical spend significantly. Fifteen to 18 percent of any given group accounts for 80 to 85 percent of overall spending for medical and pharmaceutical costs. It’s no surprise that chronic conditions account for the majority of health care expenses.
  
• Chronic diseases have a strong correlation with poor lifestyle, such as obesity, poor nutrition and high stress levels.
  
• Many people with chronic conditions have gaps in care exacerbating the malicious health consequences and ultimate spending down the road.
  
• Diabetes is the largest culprit of the chronic disease spectrum and is increasing at an alarming rate.
  

Just remember, a very small percentage of the population is creating the largest portion of our health care spend. A recent study concluded that 57 percent of employees accounted for only 9 percent of the medical claims cost averaging $840 per member. Tragically, 6 percent of employees accounted for 47 percent at an average cost of $45,191. 2
So, how do we combat these facts with real solutions? That’s the loaded question with a multifaceted answer. Living a healthier lifestyle is the most obvious conclusion. However, alternative forms of treatment and therapies are also considerations. There’s no doubt that the debate on how to solve the chronic disease conundrum will continue. One thing is for sure, it will take more than the medical community to solve the dilemma.
While I can supply another bullet point list of recommendations, it’s likely you already know what you can do, if in your control. A good start is to make sure you have an annual physical appointment (most plans include it without a co-pay). Early detection is a key for sustained health and lower costs of treatment.
The longer you go with a latent issue, the more harm it will cause down the road; both physically and economically. Make that a first step in your personal plan. You might save all of us some money!

1 Source: Benefits PRO magazine August 2018 article “Data Analytics” authored by Richard Kersh and Chris Caramanico (Orthus Health)

2 Source: Mercer FOCUS database for active employees and their dependents. ($8.5Billion in aggregate average annual costs and 1.6 Million members. Claims incurred between July 2016 and June 2017.)