This posting was written by guest author Arijit Sengupta, CEO of BeyondCore. Arijit will speak at Strata Rx 2013 on the kinds of data analysis discussed in this post.
Much of the effort in health reform in the United States has gone toward recruiting 18-to-35 year olds into the insurance pool so that the US economy and insurers can afford the Affordable Care Act (ACA). The assumption here is that health care costs will be less for this young population than for other people, but is this true? Our recent analysis of 6.8 million insured young adults, across 200,000 variable combinations, suggests that young adults may be more expensive to insure than we realize.
Our study shows a high occurrence of mental health diseases among 18-to-35 year olds who have insurance and therefore more affordable access to medical care. Moreover, expenses associated with mental health conditions are very high, especially when coupled with a physical ailment. As the previously uninsured 18-to-35 year olds get access to affordable care, we may see a similarly high rate of mental health diagnoses among this population. The bad news is that the true costs of insuring 18-to-35 year olds might be much higher than previously suspected. The good news is that previously undiagnosed and untreated mental health conditions may now actually get diagnosed and treated, creating a significant societal benefit.
First, the analysis methodology: We examined the annual amount insurers paid to healthcare providers for 6.8 million commercially insured 18-to-35 year old Fee For Service (FFS) beneficiaries. These payments included all medical costs such as inpatient, outpatient events and outpatient drugs. We examined these patients across 200,000 variable combinations using completely automated Big Data analysis without any pre-conceived notions to determine which subsets of 18-to-35 year olds had the greatest medical expenses. This hypothesis-free approach identified patterns that segment the commercially insured 18-to-35 year olds into groups differentiated by their total annual cost of care. From this analysis it was clear that mental health conditions are relatively prevalent among young adults–and the average additional costs of providing necessary care are higher than expected.
We found, for example, that the annual payout for 18-to-35 year olds with Depression was $7,700 and 8% of the insured young adult population had this condition. Fully 18% of the insured young adults had some form of diagnosed mental health issues and the average annual costs for them was $7000. For young adults, mental health issues are more significant than many traditional risk indicators. High Blood Pressure (HBP) is a widely recognized health risk. But for young adults, Depression has the same average annual cost as HBP, and Depression is almost twice as prevalent as HBP.
Of course, many experts have pointed out that uninsured young adults have low health expenses. But, conditions such as mental health problems may simply be going undetected or untreated for uninsured young people who see physicians less often. We don’t yet know what the cost of health insurance will be to this group as the state health insurance exchanges are launched later in 2013. Many in this age group may be eligible for federal subsidies. Have these mental health costs been fully considered while pricing these policies? Several insurance executives told the author that their risk models almost certainly did not look at such micro-segments while setting pricing. Insurance models are based on historic experiences, and it is precisely at times of significant market change that any flaws in the model would most likely be exposed.
We also found an interesting multiplicative pattern where the combination of a mental health issue and a physical ailment was much more expensive than expected. For example, the annual cost for young adults with heart failure was $42,000, for people taking antidepressants was $7,700, but the more than 1000 patients in our analysis who both had heart failure and were taking antidepressants had an annual cost of $70,000 (see Figure 1). Similarly, the payout for the 34,000 people with anemia and psychiatric disorders was $23,400 per year. The automated analysis also detected multiple rare but statistically significant clusters of 18 to 35 year old patients where the annual payout was more than $100,000.
Fig 1: The combination of a mental and a physical disease costs more than the sum of each disease occurring by itself
The high incidence of mental health costs among young adults is no secret, but it is not part of the conversation about the ACA either. Articles opposing the ACA, such as a Forbes analysis entitled “When It Comes To Obamacare, Ignorance Is Bliss For Young Americans” says, “ObamaCare forces young, healthy people to buy expensive health coverage costing several thousands of dollars per year, yet they use only hundreds of dollars of health care annually, including only $56 per year in total emergency room care.” While proponents point to numbers like “Of the uninsured between 18 and 35… Almost all–96 percent of them–have no chronic conditions” as reported by the Atlantic, based on numbers from a top communications and strategy aide in the White House. According to the Kaiser Family Foundation calculator pointed to by healthcare.gov, a single 25 year old non-smoker earning $35,000 would pay a premium of $2,500 for a Bronze plan and $3,000 for a Silver plan. Individuals earning less would also benefit from government subsidies. Any discussion of young adult insurance costs should account for the 18% of these patients with mental health issues who cost $7000 a year on average, several times the estimated $2,500 premiums they are expected to pay.
Experts are debating whether it is fair for 18-35 year olds to subsidize older patients, but is that premise even true? Maybe the more pertinent question is: what is the societal benefit of ensuring young adults with mental health conditions receive timely treatment?
Update, September 18: a related article covers some policy implications of this research.
BeyondCore is presenting this and other insights at Strata Rx in Boston, September 27, 2013. This analysis was powered by BeyondCore, an automated solution that makes Big Data analytics accessible to business users. The data source for most analyses is 2011 commercial claims data from multiple insurers, available from Truven. The analysis was restricted to patients for whom full drugs claims data was available. This analysis was conducted by BeyondCore as part of a broader project for a major client/partner, with the client’s permission. All opinions in this article are the author’s own and do not reflect the positions of BeyondCore or its clients/partners.