Diabetes represents an immense cost to the American Healthcare system. The primary patient advocacy group for diabetics, the American Diabetes Association (ADA), estimates that it costs the American Healthcare system over 300 billion dollars a year, representing approximately 15% of all healthcare spending in the United States. This cost is best illustrated by the chart shown below:

A considerable fraction for any one disease. These costs have accelerated at roughly 5% a year over the last 5 years, even when taking into account inflation of other goods. However, these figures do not take into account the cost of prediabetes on our healthcare system. So, this begs the question, what is the real cost of diabetes? Let’s explore.

What Is Diabetes?

Given how common diabetes has become, most people have a family member or friend that suffers from diabetes. Diabetes is a disease characterized by elevated blood glucose levels. However, not all cases of diabetes are the same.  Clinical cases of diabetes can be broadly classified as either Type 1 or Type 2.

Type 1 diabetes is generally most prevalent in children and young adults and occurs when the pancreas stops producing insulin, which is a peptide hormone produced by beta cells of the pancreatic islets; it is considered to be the main anabolic hormone of the body. Insulin is responsible for delivering glucose (sugar) from the bloodstream into muscle, fat, liver, and most other cells so that your body can use it for fuel. In the case of Type 2 diabetes,  your body does not properly respond to insulin and results in elevated blood glucose level as a result. Type 2 diabetes is more prevalent than Type 1 diabetes,  and it is generally more of a concern for older and overweight adults.

Prevalence of Diabetes

It is estimated that for every one person with diabetes, there are at least two that have prediabetes. Currently, among adults, roughly 1 in 3 Americans is either diabetic or prediabetic; that represents over 100 million Americans. Epidemiological and medical literature indicates that diabetes is highly associated with many other health problems such as obesity, heart diseases, and other chronic diseases. There is also significant ethnic variation in the prevalence of diabetes as well; minorities and people with lower socioeconomic status tend to have higher rates of Type 2 diabetes compared to their counterparts. Moreover, your chance of developing Type 2 diabetes significantly increases as you age as well.

Direct Healthcare Cost

According to the ADA, in 2017, the average annual healthcare costs $16,750 per diabetic; approximately 2.3 times higher compared to their healthy counterparts. Most of these costs originate from hospitals and procedures that diabetics must undergo because of the complications associated with their diabetes. Furthermore, approximately a third of the healthcare costs are due to diabetic medications and physician visits to manage symptoms.

Not only is it expensive to manage diabetes, but it has been shown to give individuals a higher risk of heart disease, cancer, and virtually every other diseases. These complications are equally costly to manage and are a burden on the American healthcare system. It is estimated by the ADSA that roughly a third of all healthcare costs due to diabetes are the result of its complications. However, while morbid to discuss, diabetes treatments and management represent a vast market for American drug makers, hospitals, and providers. This is one ignored benefit of having so many diabetics in the United States; it has become a formidable industry.   

Indirect Cost: Worker Productivity

A considerable fraction of the cost of diabetes on society is represented by how it impacts the productivity of workers;  an opportunity cost to the labor force that has been hard for economist and healthcare providers to quantify. However,  the ADA estimated that this loss in productivity costed the United States workforce $90 billion dollars in 2017. This loss in productivity includes, but is not limited to, workers having to retire early, missed work days,  premature death, loss in life expectancy, or being less effective at their job. Moreover, it is estimated, that the days of work lost due to disability caused by diabetes and early death are responsible for over half of these costs associated with loss of worker productivity.

The latter has not been as well studied or quantified over the years. However, diabetes is not a uniform disease, since there are different degrees of severity. Some workers may be more affected by it than others, causing some workers to be better able at managing and concealing their symptoms from their employers. Numerous studies have found that diabetics are more likely to have costly workplace limitations and accommodations; making them less valuable to employers and more expensive to retain than their healthier counterparts.  

This could make it difficult for some diabetics to gain employment. Moreover,  diabetics are also less likely to work and participate in the labor force than their more healthy counterparts. In some cases, diabetes may be classified as a disability and patients may be able to receive Supplemental Security Income(SSI) to help make their income higher so that they can live. However, this only occurs if one’s diabetes has gotten to the point where it is not manageable, and prevents patients from working for at least the next year. However, traditionally, this is rare.  

The Cost of Prediabetes

Those with prediabetes can often require extensive medical treatment to prevent their condition from getting any worse. It has been estimated that each incidence of undiagnosed prediabetes costs $510, and $4,030 if it evolves into full-fledged diabetes. Prediabetes is a difficult condition to diagnosis and it is generally associated with those patients that have elevated glucose levels but do not meet the criteria for the clinical definition of diabetes.

In 2012, the CDC estimated that nearly 100 million Americans could be classified as prediabetic, with an associated healthcare cost of over $25 billion annually. This does not include costs associated with lost worker productivity. However, identifying cases of prediabetes or undiagnosed diabetes, by definition, is very difficult. Therefore, the actual costs associated with prediabetes may be substantially larger than those projected.

Is Diabetes Becoming More of a Burden?

So,  is diabetes becoming more of a burden? Perhaps. Despite the financial burden that diabetes represents to our healthcare system, the current number of new diabetic cases appears to be relatively stable and constant. This allows companies that offer products and services to diabetics to make decisions about the future with more certainty than those working on other diseases.

However, the same cannot be said for other comorbidities associated with Diabetes. America’s obesity epidemic appears to be getting worst. Epidemiological evidence indicates a strong link between obesity, as classified according to one’s BMI, and elevated blood glucose. This means that as obesity becomes more of an issue in the United States, the incidences of type 2 diabetes have a high likelihood of increasing as well.  

Elasticity of Diabetic Services and Healthcare Products?

Elasticity is a property that examines how one variable responds due to a change in another variable. If a product has inelastic demand, then changing the price of that product has little to no impact on how much of that product consumers will buy. Conversely, if a product has an elastic demand, then changing the price of that product has a greater impact on how much of it consumers will buy.

Most preventive healthcare services and products have a really high elasticity of demand. In other words, the increasing cost of preventive healthcare services and products means patients will dramatically shy away from it. This is generally the case with all health services where the patient does not face a life or death situation. Why spend money on healthcare if it is not absolutely necessary to maintain your health?

However, for patients with advanced cases of diabetes, diabetic supplies such as testing strips and insulin become necessary to live, and most research indicates that these products have an inelastic demand. This is also the case for surgeries that diabetics need because the complication for their diabetes has gotten too bad to treat with medication. As a result, most prediabetics may forgo treatment in the early stages but are willing to pay almost any price when their diabetes has gotten out of hand. This creates a serious roadblock in the treatment of diabetes and is potentially the reason diabetes is such a burden to the United States healthcare system.

Sources: 1, 2, 3, 4