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Decoding Healthcare Costs: Are You in One of These High-Spending Groups?

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Rhea Morgan in Health & Wellness December 2025 • 5 min read.

"A new study identifies key subgroups within Medicare Advantage, offering insights into where healthcare dollars are spent and how care can be improved."


The rising cost of healthcare is a major concern for everyone, especially as we age. We hear a lot about expensive treatments and wonder where all the money goes. A significant portion of healthcare spending is concentrated on a relatively small percentage of patients. Understanding who these individuals are and why they incur such high costs is crucial to improving the healthcare system for everyone.

Most research in this area has focused on those with traditional fee-for-service Medicare. However, an increasing number of people are enrolled in Medicare Advantage plans, which operate differently. That’s why a recent study published in the Journal of General Internal Medicine is so important. It dives deep into the characteristics of high-cost patients within a Medicare Advantage population, identifying distinct subgroups that drive the most spending.

This research provides valuable insights into how we can better manage care and allocate resources to improve outcomes and reduce costs. If you’re a patient, caregiver, or simply someone interested in understanding the complexities of healthcare spending, this breakdown is for you.

What Drives High Healthcare Costs? Unveiling Key Patient Subgroups

A diverse group of people connected by medical symbols and dollar signs, representing healthcare costs.

The study, conducted by Brian W. Powers et al., analyzed data from over 61,000 Medicare Advantage beneficiaries. The researchers used a sophisticated clustering algorithm to group high-cost patients (the top 10% of spenders) based on a variety of factors, including demographics, clinical conditions, and claims data. This approach allowed them to identify ten distinct subgroups within this high-cost population.

The key finding was that high-cost patients accounted for a whopping 55% of total healthcare spending. These patients tended to be younger, more often male, and had a greater number of comorbid illnesses. But what's truly revealing is the breakdown of these patients into specific subgroups, each with its own unique characteristics and healthcare needs:

  • Acute Exacerbations of Chronic Disease (Mixed): Often dealing with hospitalizations, these patients frequently experience conditions like cerebrovascular issues, COPD, heart problems, and mental health disorders. Preventable spending rates are notably high in this group.
  • End-Stage Renal Disease (ESRD): Facing advanced kidney disease and undergoing dialysis, these patients are among the highest spenders and have a significant mortality rate.
  • Recurrent Gastrointestinal Bleed (GIB): Characterized by repeated gastrointestinal bleeding and related complications, these individuals often require frequent hospital and ED visits.
  • Orthopedic Trauma (Trauma): Dealing with fractures and other injuries, these patients have the highest rates of inpatient utilization.
  • Vascular Disease (Vascular): Managing peripheral vascular disease, this group generally has lower utilization and spending rates compared to others.
  • Surgical Infections and Other Complications (Complications): Experiencing surgical wound issues, infections, and iatrogenic complications, these patients often require inpatient care.
  • Cirrhosis with Hepatitis C (Liver): Battling liver disease and hepatitis C, these patients have the highest average spending, largely driven by prescription drug costs.
  • ESRD with Increased Medical and Behavioral Comorbidity (ESRD+): In addition to kidney disease, these patients face congestive heart failure, mental health disorders, and liver failure, leading to high rates of preventable spending and mortality.
  • Cancer with High-Cost Imaging and Radiation Therapy (Oncology): Undergoing cancer treatment with extensive imaging and radiation, this group is predominantly male with prostate cancer being common.
  • Neurologic Disorders (Neurologic): Managing various neurological conditions, including multiple sclerosis, these patients have high rates of persistent spending, primarily on prescription drugs.
These subgroups highlight the diverse nature of high healthcare costs. It’s not just about one type of patient or one specific condition. Each group faces unique challenges and requires tailored approaches to care.

A Path Forward: Tailoring Care to Reduce Spending and Improve Outcomes

The study's findings emphasize that a one-size-fits-all approach to managing high-cost patients simply won't work. To effectively address the challenge of rising healthcare costs, we need to move towards more personalized and targeted interventions. This means developing care management programs that are specifically designed to meet the unique needs of each subgroup. For example, patients with neurologic disorders may benefit most from strategies focused on medication management and adherence, while those with acute conditions may require interventions aimed at preventing hospital readmissions.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

Everything You Need To Know

1

What are the different types of high-cost patient groups that were identified?

The study identified ten distinct subgroups within the top 10% of high-cost patients in Medicare Advantage. These include: Acute Exacerbations of Chronic Disease, End-Stage Renal Disease (ESRD), Recurrent Gastrointestinal Bleed (GIB), Orthopedic Trauma, Vascular Disease, Surgical Infections and Other Complications, Cirrhosis with Hepatitis C, ESRD with Increased Medical and Behavioral Comorbidity, Cancer with High-Cost Imaging and Radiation Therapy, and Neurologic Disorders. Each subgroup has unique characteristics, such as specific conditions, utilization patterns, and cost drivers.

2

Why is it important to understand the different subgroups of high-cost patients?

These subgroups matter because they highlight the diversity of high healthcare costs within Medicare Advantage. Understanding the specific conditions and needs of each group allows for more targeted and effective care management strategies. For instance, the Recurrent Gastrointestinal Bleed subgroup requires interventions focused on reducing hospital and ED visits, while the Neurologic Disorders subgroup needs strategies to manage medication and improve adherence. This tailored approach is more effective than a one-size-fits-all method.

3

How much of total healthcare spending is attributed to high-cost patients?

The study found that high-cost patients in Medicare Advantage accounted for 55% of total healthcare spending. This concentration of spending underscores the importance of understanding and managing the needs of these individuals. By identifying the specific subgroups that drive these costs, healthcare providers and policymakers can develop interventions to improve outcomes and reduce unnecessary spending.

4

What solutions are suggested to better manage high-cost patients?

The research points to the need for tailored care management programs designed to meet the specific needs of each subgroup. For example, patients with Acute Exacerbations of Chronic Disease may benefit from interventions aimed at preventing hospital readmissions, while those with Cirrhosis with Hepatitis C may require strategies focused on managing prescription drug costs. This targeted approach is crucial for improving outcomes and reducing healthcare costs effectively.

5

What are the main factors that drive high healthcare costs in these different groups?

Several factors contribute to high healthcare costs in these subgroups. These include chronic conditions, comorbid illnesses, hospitalizations, emergency department visits, prescription drug costs, and the need for specialized treatments such as dialysis or radiation therapy. Certain subgroups, such as those with ESRD or Cirrhosis with Hepatitis C, have particularly high spending due to the intensive and ongoing nature of their care. Additionally, preventable spending rates are high in subgroups such as Acute Exacerbations of Chronic Disease and ESRD with Increased Medical and Behavioral Comorbidity.

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