Health Care Costs: Chronic Vs Catastrophic Care

McKinsey and Company, one of the top business consulting firms in the world, has an interesting point of view on health care. Unfortunately, except for a teaser, the entire article requires an expensive premium subscription to the McKinsey Quarterly.

McKinsey believes the key to understanding health care costs is to understand health risk. The article's point of view is that health care risk has changed from infrequent catastrophic events to more chronic conditions requiring constant care.

The fundamental nature of medical risk in the United States has changed over the past 20 to 30 years—shifting away from random, infrequent, and catastrophic events driven by accidents, genetic predisposition, or contagious disease and toward behavior- and lifestyle-induced chronic conditions. Treating them, and the serious medical events they commonly induce, now costs more than treating the more random, catastrophic events that health insurance was originally designed to cover (Exhibit 1). What’s more, the number of people afflicted by chronic conditions continues to grow at an alarming rate.

Mckinsey states, "Treatment for unpredictable, catastrophic events accounts for only 31 percent of total US health care spending."