How Much Do Health Disparities Actually Cost?

June 23, 2022
Medpage Today
By Sophie Putka

Health inequities in the U.S. currently cost $320 billion annually and could balloon to $1 trillion by 2040, as the population becomes less white, per-capita spending increases, and Medicaid enrollment grows, according to a new report by consulting giant Deloitte.

The findings serve as a reminder to stakeholders that if they don’t act to correct disparities in healthcare in a health system already exacting a grave human toll, they’ll be losing money, too.

“This should be a call to action for organizations up to this point,” Andy Davis, FSA, MAAA, principal actuary for Deloitte, which advises hospitals, health systems, and pharmaceutical companies, among other clients across industries, told MedPage Today.

To calculate how much health inequities cost now and to extrapolate their financial toll in the future, the company focused on disparities in health outcomes that arise due to patients’ gender, race, or socioeconomic status in multiple populations affected by inequity in various disease states.

For example, Black adults are 60% more likely to be diagnosed with diabetes than white adults, and two to three times more likely to experience complications, such as amputation and end-stage renal disease. The researchers found that 4.8% of spending on diabetes is associated with this particular disparity, resulting in $15 billion in unnecessary spending.

The researchers also conducted literature reviews among studies with data on disparities in various populations to understand the metrics for additional disease states, such as asthma, heart disease, breast cancer, and colorectal cancer.

While there are other inequities besides gender/sex, race, and class, like age and ability, Deloitte actuaries focused on the most diligently documented problems. They also factored in the effect of intersectionality of inequities — for example, a low-income Hispanic woman might face bias that’s compounded by race, class, and gender in the healthcare system.

The actuaries were conservative in their estimates of costs, according to the report. In reality, the cost of inaction on health inequity may be much higher, since the actuaries couldn’t account for how every disease might impact another and affect health spending.

While “mathematical modeling allows us to come very close” to accurately calculating these costs, “it’s likely that the problem is worse than what the model predicts,” noted Lesley Rennis, MPH, EdD, an associate professor at CUNY’s Borough of Manhattan Community College and an expert in public health research and evaluation.

However “the analysis does an excellent job pinpointing the ways in which differences in health access and treatment impact costs,” she added.

Kellan Baker, PhD, executive director and chief learning officer at the Whitman-Walker Institute, which researches and advocates for health equity with a focus on LGBTQ+ health, also said Deloitte’s estimates seemed conservative, though he doubted that they could be calculated accurately at all.

The true costs of health disparities “are likely much higher than any estimate, due to the complex and interconnected factors that affect health, many of which lie outside the field of health itself,” he explained.

Deloitte also didn’t factor in social determinants of health, like housing, education, food, and physical environment, which have an enormous impact on health outcomes and spending.

Rennis pointed out that chief among social determinants of health are economic disparities: “Without addressing poverty and what it does to the health and well-being of those who live in it, we will never fully address health inequities or their potential cost to society.”

Doing the right thing for those underserved by the healthcare system isn’t always enough for the big businesses that form its backbone, the report suggested. With “health insurance organizations, and we see this with the health systems and even biopharma life science organizations, the right thing to do is always not the easiest choice, because it’s hard to see where the return comes from,” said Davis.

Though the report did not offer detailed policy or systems recommendations for improving health equity, the actuaries suggested that stakeholders factor equity into all business decisions, foster cross-sector partnerships, address social determinants of health, and build more inclusive workforces, among other strategies.

Hopefully we transition from “it’s not just the right thing to do,” to having a “business imperative behind us,” said Davis.

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