The Health Inequities “Tax”—A Cost of U.S. Healthcare

Health inequities have long been a dreadful, distinctive facet of the U.S. healthcare industry. Health economist Jane Sarasohn-Kahn discusses financial implications.

By Jane Sarasohn-Kahn, MA, MHSA

Beyond the moral arguments for America’s health system to address health disparities, the economic rationale is compelling.

In 1983, during Ronald Reagan’s presidency, Secretary of Health and Human Services Margaret Heckler authored a report describing health disparities in the U.S. This was the first time the U.S. government researched the health status of racial and ethnic minorities on a national basis.

The Report of the Secretary’s Task Force on Black and Minority Health, aka “The Heckler Report,” found that six causes of death comprised more than 80% of mortality among Black people and other racial and ethnic groups versus white people. Those conditions were cancer, cardiovascular disease and stroke, chemical dependency, diabetes, homicide and accidents, and infant mortality.

Fast-forward nearly 40 years. In an analysis issued by Deloitte earlier this month, we learn that health inequities account for approximately $320 billion in annual healthcare spending. That equates to $1,000 per capita health citizen in the U.S. That’s a sort of tax on the U.S. healthcare system, which is a tax on everyone and every industry stakeholder in the healthcare ecosystem.

The High Cost of Health Inequities

Echoing the Heckler Report’s learnings, Deloitte considered five disease areas for this analysis: diabetes, coronary heart disease, asthma, breast cancer, and colorectal cancer.

Let’s just look at diabetes, as an example: Deloitte highlights the health disparities in Black adults who are 60% more likely than white adults to be diagnosed with diabetes, and two to three times more likely to have complications from the condition.

Deloitte estimates the annual cost of treating diabetes runs $327 billion in the U.S. The CDC estimates that $1 in every $4 of health spending in the U.S. goes to treat diabetes. In the Deloitte study, there is $15.6 billion of unnecessary spending attributable to just this one health disparity. If we use the CDC statistic on the cost of diabetes in America, that savings accruable by addressing health inequities would be even greater.

Building on the business case for addressing diabetes health equity, we can learn more from a recently published study in The Lancet, “Prioritising COVID-19 over everything: the unintended harm.” In this global survey, researchers found that diabetes was the condition reported to be the most impacted by the reduction in healthcare resources during the pandemic. As we came to find in the U.S., diabetes was a key pre-existing condition which disproportionately impacted Black and Hispanic patients’ complications due to the coronavirus, resulting in greater death rates early in the pandemic.

Risks for social determinants of health such as food, transportation and lead found in housing structures further contributed to the higher rates of Blacks dying from COVID-19 spotted as early in the pandemic as April 2020, as this Brookings Institution report explains.

The Business Case for Addressing Health Equity

There is a business case for addressing health equity, noted by the W.K. Kellogg Foundation in a 2018 study. Kellogg estimated that $93 billion was spent on excess healthcare costs due to health disparities, and $42 billion in lost productivity.

Kellogg explained that beyond growing economic output in the U.S., advancing racial equity can grow consumer spending (further fueling the national economy), as well as federal and state/local tax revenues. This is especially important in the current economic environment with jobs gone unfilled.

One of Kellogg’s recommendations was to address local social, economic and environmental determinants of health through place-based community coalitions. “Where a person lives in the U.S. can dramatically affect that person’s chance of living a longer healthier life,” the report states, “in some cases by as much as 22 years.”

This phenomenon of ZIP code being more impactful than genetic code on one’s health is illustrated by the latest U.S  News-CVS Health 2022 Healthiest Communities report. The fifth annual report notes that, “The COVID-19 pandemic has brought light to the health inequities that underserved communities have experienced for decades, and the reality is that health inequity is an American crisis.”

Cross-Sector Collaboration Is Needed

The report also recommends cross-sector collaboration to address the risks of determinants of health, realizing that, “no one person, organization or entity can do this alone. The private sector, employers, governments, hospitals, healthcare workers—everyone has a role to play.”

“The underlying problem of healthcare spending is health inequity,” Pierre Theodore, VP of global eternal innovation with Johnson & Johnson, told Deloitte in its research with industry leaders.

Theodore explained in the report that addressing inequities is a “rising tide, all boats” phenomenon: “when you address inequities for one population, you raise health for all populations.”

Doing so would kick off a flywheel of a virtuous cycle, which McKinsey described in its March 2022 report Health equity: A framework for the epidemiology of care. McKinsey talks about the “epidemiology of care,” addressing the variations in how patients are treated.

Digital Tools and Data Analytics Are Needed

In addition to advancing public policies that directly re-shape education, food systems and nutrition, and the health of physical spaces and town planning, getting to the root of epidemiology of care requires sophisticated digital tools, analytics and critical thinking.

And that needs data, better data that can undergo rigorous health equity analysis.

Earlier this month, the Office of Inspector General (OIG) in the U.S. Department of Health and Human Services published a study into the inaccuracies in Medicare’s race and ethnicity data hindering the ability to assess health disparities.

The study found that Medicare’s enrollment data on race and ethnicity were less accurate for some groups, even with a useful algorithm able to improve the missing data elements “to some extent,” OIG attested. The Office offered several recommendations to the Center on Medicare and Medicaid Services, such as using self-reported race and ethnicity information to improve the information on current enrollees, and at the same time to educate people about CMS’ efforts to improve race and ethnicity information.

Doing so would bring the very people directly impacted by health inequity into a process of co-creating good data and informing policies and solutions. New models of collaboration to address health equity should adopt the “nothing about me without me” mantra that is the ethos of patient social networks.

Keys to Mitigating Health Inequity

Being intentional, forming partnerships, measuring progress, and addressing individual and community-level barriers are four recommendations Deloitte offers us as calls-to-action to mitigate health inequity.

There’s a fifth one that’s really hard and really crucial: to render trust across the system, from individual healthcare providers to institutions in data and technology.

The health equity “tax” hits all of us, and we must all take part in solving the crisis, together.