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80% of healthcare bills incurred by 20% of population

There is a lot of talk about healthcare, with most of the discussions around access to coverage or cost of medications. What is rarely talked about is that the fact that majority of what we spend as a nation on healthcare is spent on a small segment of the population. In fact, it is estimated that as much as 80% of what we spend on medical bills as a nation goes to only 20% of the population. Other studies show that as much as 65% of what we spend goes to 10% of the population or 50% of costs go to 5% of population.

Now keep in mind this data is hard to get and there is not one conclusive. But no matter the source, the data shows the same concept in that most of what we spend on medical bills goes towards a select few. Note that lack of data is a huge problem in itself….as you can’t improve something without data to identify root causes, set a baseline of where you start, etc. But I digress.

Amount spent on number of people

Lets just go with those 80/20 numbers above as reported by studies (including the U.S. Department of Health & Human Services’ Agency for Healthcare Research and Quality as well as PolitiFact) as well as insurance companies (including CareOregon and Truven Health MarketScan Commercial Insurance Database). We can break further down the data if 80% of our healthcare expenditures go towards 20% of the population.

The total US healthcare spend (both government and privately) is estimated at $3.7 trillion dollars per year. There are about 330 million people in the US. What this means is the following:

  • ~$2.8 trillion is spent on ~65 million people, or ~$43,000 per person.
  • The balance of ~900 billion is spent on ~265 million people, or ~$3,300 per person.

This means that 20% of the population was responsible for 13 times more in medical bills than the other 80%. If you use some other data points, including 10% of people are responsible for 65% percent of bills or 5% of people are responsible for 50% of health care costs shows even more distortion.

That is obviously a HUGE problem that is rarely discussed and there are definitely no solutions being brought to it. What is sad as that is that for those who think this way, a huge problem can be looked at as a huge opportunity.…if you address that 20% of the population then you have the potential to make a big difference.

Why should you care

I am not sure what percentage of the population even know what insurance is or how it works. And I say this objectively, as we have reported many times the financial literacy in the US is sorely lacking as shown by study after study and test after test. And understanding insurance is one component of financial literacy.

While there are of course formal definitions of insurance, at the highest, 10,000 foot level it is a form of “shared risk”. Private health insurance (as well as other insurance such as Medicaid) is in effect spreading the cost of medical bills across all the people who are insured, no matter how sick, healthy, fat, skinny, obese, etc. they may be. What this means is that since it is shared risk, everyone who uses the medical system is paying more for healthcare, insurance and other medical bills than they otherwise would in order to subsidize the high cost 20%. As the high bills of those 20% are spread among the 80% too.

In other words, for those people who take zero personal responsibility for their health (such as eat terribly, smoke, lay out in the sun, do not follow doctor advice on say checkups or medications, who never exercise, etc.), everyone else needs to pay higher medical bills for their lack of personal responsibility. The people who try to eat well, exercise, take care of their mental and physical health, those people who “try” to care care of themselves need to pay higher insurance payments, deductibles, and other medical bills as after all, insurance is shared risk.

Health insurance, and the entire medical care industry, is one of the few things in life that people can get away with having zero personal responsibility for. This means it can be abused. At least with auto insurance there is some personal responsibility – as if you speed all the time, get into accidents, etc. and get caught, your insurance will generally go up. That means that you are penalized in the form of higher monthly auto insurance bills for driving recklessly and rewarded in the form of lower bills for being safe.

Contrast that with medical insurance – You are not (or very rarely/minimally) penalized financially for being unhealthy or rewarded financially for being healthy. Also, there is no personal responsibility when it comes to shopping for medical care. Who “shops” around to compare prices for a surgery or for check-ups?


Are some of those 20% who we as a nation spend trillions of dollars on abusing it? I bet there are. Of course, some of those 20% are also probably truly sick and have conditions they have no control over, and they legitimately need all the care we as a nation and those who show empathy can give them. But everyday I see people smoking, eating terrible food, abusing alcohol, obese people eating fast food, etc. That is a form of abuse and/or no personal responsibility. Why should their insurance premiums be the same as mine? People who try to live a healthy life are subsidizing those individuals.

Therefore, to answer why you should care, you should care because if you try to live healthy, and you see others eating fast food, laying on the couch everyday, using tanning salons, smoking, etc. you are paying for their medical bills. Nice thought huh? Why is this issue not discussed by our leaders, or more importantly, why do they do thoughtfully bring up the problem of why is so much healthcare spend (80%) covering a small percentage of the population (20%).

What is the true health care crisis?

Obviously the US spends a lot of money on medical care. Millions of people also lack health insurance and/or have poor coverage. But when it comes to cost of health care, if people say we spend too much (which we do) or access to healthcare should be a human right (which personally I believe it should be), just giving everyone private health insurance or Medicare for All will not stop or address the problem of cost. That will not make your medical bills go down.

Lack much of what we write about and life itself, this issue is complicated with no easy answers. But it is sad the problem/opportunity is not discussed. Why are 20% of the population responsible for 80% of the bills? What can we do differently there with that 20% group?

Moving the needle in a positive direction (even slightly) for those 20% that we spend 80% of our nation’s bills on would almost certainly lower your own personal medical bills and the nations expenditures. As noted, I am sure that some of those people are truly sick and nothing can be done. But I would be very confident that there are also absolutely some people in that 20% group that live a totally unhealthy lifestyle and take zero accountability. Why won’t a thoughtful leader dig down into the root cause of this issue and try to address it? Or at least talk about it.


Jon McNamara is the CEO of needhelppayingbills.com, a company that he started in 2008 and that specializes in helping low income families as well as those who are in a financial hardship. He also found NHPB LLC, a company committed to helping the less fortunate. Jon and his team also provide free financial advice to help people learn about as well as manage their money. Every piece of content on this website has been reviewed by him before publishing and many of the articles he has personally written. Jon is the leading author for needhelppayingbils.

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