Comparing Medical Costs by Analyzing High-Cost Cases

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Abstract
Most of the medical care expenses paid by an entire company are generated by a small percentage of employees. The most expensive employee may have costs 100 to 500 times as much as the typical employee. Instead of comparing average costs, it makes sense to investigate whether employees with unhealthy behaviors are more prone to extreme costs. This article describes methods of comparing the costs of health risk groups by examining the proportion of high-cost employees in each group. The article illustrates the methods using a health claims dataset that compares male smokers, ex-smokers, and nonsmokers.