Focusing on heavy users of healthcare is the wrong way to control costs.

We always hear that 5% of people consume 50% of a population’s health spending. I call this group “The Five Percenters.” This is the reason why there are initiatives worth hundreds of billions of dollars— things like Medicare Advantage— and the subsequent rush of billions of VC money into that crowded space. The thinking is the 5% cohort are heavy users and designing for this group provides focus. It’s so much easier to reach only 5% of Americans vs the 95%, right? But there are three types of people in this cohort that each represent about ⅓ of the makeup of this 5%.

#1: People with one or more chronic medical conditions that could be improved or kept under control.

#2: People who suffer a one time catastrophic health problem. The car accident. The skiing accident. The benign brain tumors in the 30 year old that are removed never to return again. 

#3: People with severe chronic conditions who can’t be returned to good health and require expensive treatment continually until they inevitably die. 

Persona 1: The Sick but Malleable

This cohort is about 1.6% of people in a population and they cost 15% of the entire health spend of a population. The people in this cohort change year to year. So it’s almost impossible to predict who will enter this cohort. And it’s hard to predict who will fall out of this cohort and go back to normal spending. If there’s a magical intervention for this cohort that comes in the form of next generation care management and this service is able to shave 20% of this cohort’s spending (btw, that’s a magic service), the total spend for the population will decrease by 3%.

Persona 2: “The One-time Eventers”

This cohort is also about 1.6% of people in a population and they cost 17.5% of the entire health spend in a population. There is no way to predict who will get into a car accident so any intervention here is almost impossible. We just have to live with these costs.

Persona 3: “The Inevitables”

This cohort is also about 1.6% of people in a population and they too cost about 17.5% of the entire health spend in a population. They are highly predictable. It’s very easy for doctors and the system to know that someone is getting sick and they’re going to be sick until they die. There are interventions for this group that are very resource intensive that take lots of expensive care management bodies to implement. And at the inevitable end, there’s no ROI. Just leave these patients to the mercy of the American Healthcare Industry and the total cost is the same. 

In summary, a service can only impact “The Sick but Malleable” and shaving 20% of their costs only saves the system 3%. And that’s only if that intervention perfectly reaches every person in that cohort in all of America. Anyone who has tried to deliver a service like that knows how much magic needs to be sprinkled on something to save 20%. Also, these people are so deeply plugged in to the local system already and that local system is doing everything they can to maximize their revenue from all that sickness. In reality, the best an intervention can do is more like saving 7% for 20% of that cohort— that makes the potential savings moot. 

Sounds dire no? But there’s another way to frame this. 

What about the 95% of people who spend 50% of an entire population’s costs? 

I call this population “The Ninety-five Percenters.” They are the neglected ones in our country. They’re often referred to as “worried well” or some other demeaning term. They are ignored because they aren’t high spenders as individuals and policy wonks only want to create solutions for heavy users of healthcare. But this group’s “purchasing power” is 50% of the population’s health spend which is about 1.5 trillion dollars. This is the same population that every single brand you see advertised anywhere in the US is going after because they are actively out spending their money on things like cars, iPhones, food, travel, etc. For some reason, healthcare policy wonks want to ignore them and think that the hodge podge of local health services in the form of “old-fashioned broken primary care or docs in boxes has them all taken care of.” 

But that’s BS. What does literally 95% of our population need? First, a single sign on to a nationwide platform that offers the following services:

  • 100% Up to Date status for all USPSTF recommendations
  • Easy access Virtual Primary Care (Sherpaa used to offer this, but it currently doesn’t exist in the US)
  • Easy access, affordable specialist consults (Rubicon)
  • Affordable, inexpensive or moderately expensive medications (Cost Plus Drugs)
  • Affordable occasional lab work (doesn’t exist in the US)
  • Affordable occasional imaging (doesn’t exist in the US)
  • Affordable psychotherapeutic interventions (doesn’t exist in the US)
  • Affordable urgent care (patchwork of locals)
  • Affordable retail clinic care (patchwork of locals)
  • Affordable physical therapy (patchwork of locals)

Let’s say a service like this can exist in America and, because it was born on the internet with today’s technology and potential, let’s say it can shave 20% of the cost of care in the 95% of us who aren’t heavy spenders. Saving 20% in this cohort saves 10% of the total population’s costs, which is 3x the potential savings when focusing on the fraction of the 5% who are amenable to an intervention.

This is the promise of virtual care, if, and only if, it’s viewed more as an ongoing value-adding tech-enabled service delivered via a trusted brand hiring trustworthy professionals, rather than a quick one-off transaction from commodity siloed services.

And there’s also this: