Financial issues and cancer

DEFINITION: Financial issues related to cancer include the financial burden on cancer patients and their families, the costs to insurers and employers, and the financial implications of cancer for the economy and government. Some of the economic issues include the rising costs of new treatments, bankruptcies caused by medical bills, and the high cost to society in terms of lost productivity, excess mortality, and morbidity related to cancer.

Overall cost of cancer: In 2009, cancer expenditures in the United States totaled about $86.6 billion for inpatient and outpatient care, drugs, and devices, according to National Institute of Health estimates. This amount represents less than 10 percent of all medical spending ($2.5 trillion that year) and less than 1 percent of the total US gross domestic product (GDP), a measure of all the goods and services produced in the economy ($14.4 trillion), as reported by the Centers for Medicare and Medicaid Services in 2012. In 2020, the total amount spent on cancer in the United States rose to $208.9 billion.

Cancer is one of the top two leading causes of death in the United States, according to the Centers for Disease Control and Prevention. However, cancer is often a disease of old age and is frequently terminal. Although treating cancer can be expensive compared with the cost of treating many other diseases, the cost of chronic illnesses that require medical care over an extended period (such as diabetes) can be much higher. Cancer expenditures may be of greater concern in the future, as International Agency for Research on Cancer reported in 2024 that the incidence of cancer cases is expected to nearly double to 29.9 million by 2040.

Cancer expenditures are growing at about the same rate as overall medical spending. This may seem somewhat counterintuitive because the incidence of many types of cancer has been increasing and many intensive and expensive forms of treatment have been introduced in the twenty-first century. At the same time, the average length of hospital stay has been decreasing, and there has been an increase in the number of early-stage cancers detected because of improved screening programs.

Morbidity and premature mortality are called “indirect” costs, because they represent lost resources rather than outgoing payments. Although indirect costs are hard to measure and sometimes controversial, accounting for these costs gives a clearer picture of the total burden of a disease. The additional economic burden of cancer-related mortality due to lost work productivity was estimated at about $130 billion in 2009, according to the American Cancer Society. Other indirect costs include both absenteeism and “presenteeism” (reduced productivity while at work) and lost earnings because of premature deaths.

The main measure of premature mortality is years of life lost (YLL), which can be calculated as person-years of life lost in a specified period based on average age at diagnosis and patterns of mortality. Such calculations are then translated into dollar amounts, although doing so requires making assumptions regarding the labor market that are subject to error. According to the National Cancer Institute's Cancer Trends Progress Report—2011/2012 Update, the estimated cost from cancer in the United States in 2008 was 8.7 million YLL. Dividing the YLL by the number of deaths for each cancer site produces an additional statistic, the average years of life lost (AYLL), which is a measure of the premature mortality burden of cancer to the individual patient. Among the top thirty leading causes of death in 2010, liver cancer patients experienced the lowest AYLL, while lung cancer patients had the highest, as noted by the US Burden of Disease Collaborators in a 2013 JAMA article. In 2020, the AYLL was 15.2 years per person, meaning that each person who died because of cancer lost an average of 15.2 years of their life, according to the National Cancer Institute.

Costs of treatment: The cost of medical treatment for a single case of cancer depends mainly on the type of cancer and the seriousness of the disease (size of the tumor, how much the cancer has spread, whether it can be treated with surgery, and so on). Other factors that influence the cost of care include the age and sex of the patient, how many other illnesses the patient has, and where the patient receives care (geographically and by setting, such as an academic hospital or specialty facility). In addition, some patients are charged less than others. Patients with no health insurance are often charged full price, which can be many times the cost billed to patients with insurance because of negotiated discounts.

According to the 2020 National Cancer Institute Cancer Trends Progress Report, the average initial cost per cancer patient across all cancer types was $43,516, and the average last year of life cost was $109,727. Brain cancer had both the highest initial cost, at $139,813, and the highest last year of life cost, at $176,354.

In one study of more than 38,000 cancer patients followed for an average of eleven months, the mean cost of treating cancer was about $32,000, with monthly costs ranging from $1,800 for prostate cancer to $7,300 for pancreatic cancer. The largest component of care was inpatient hospital bills, followed by outpatient office visits. The mean monthly cost for drug treatments ranged from $10 for prostate cancer to $750 for ovarian cancer.

The cost of drugs used to treat cancer has been the subject of controversy. Although drug costs account for only about 10 percent of total health care spending, the prices charged by pharmaceutical companies are more transparent to consumers than prices charged by other medical providers because consumers often pay more out of pocket for drugs. In addition, there is great controversy over the cost-effectiveness of some of the newer drugs. In many cases, using one of the new drugs will not extend a patient’s life more than a few months, yet the cost of the drug can be prohibitive.

Financial impact on patients: Cancer can be a very expensive disease. Many types of cancer are complicated to treat and often require the services of a team of medical providers, including surgeons and specialists in radiation and chemotherapy. Cancer care may require many absences from work for diagnosis and treatment, and long hospital inpatient stays are required for many interventions. Patients may find that they need second opinions on biopsies and therapy. Patients with insurance may have to fight with insurers to get them to pay for treatments.

One survey found that more than half of bankruptcy filings are caused by medical expenses, and the highest out-of-pocket expenses were associated with cancer. More than three-quarters of those who filed for bankruptcy because of medical expenses said that they had health insurance at the time of their diagnosis. One estimate is that, on average, out-of-pocket medical costs consume more than a quarter of the total annual income of low-income people.

A national survey of cancer patients conducted by USA Today, Harvard University, and the Kaiser Family Foundation found that about 25 percent had used up most or all of their savings. More than 10 percent said they had experienced problems paying for necessities like food and shelter, and 3 percent had declared bankruptcy because of the financial cost of dealing with cancer. One in twelve respondents said that they delayed or did not get care because of the cost. Although 95 percent of patients in the survey had health insurance, nearly 1 in 4 said that their insurance plan paid less than they expected for a bill, 13 percent said their plan would not cover a treatment they received, and 10 percent reached their maximum allowance for coverage.

In the same survey, 44 percent of cancer patients reported that they were employed outside the home when they were diagnosed. Most said that their employers treated them well. The Americans with Disabilities Act (1990) and the Family and Medical Leave Act (1993) protect cancer patients to some extent, because they require employers to make reasonable accommodations for the limitations of cancer patients on the job and entitle patients and their caregivers up to twelve weeks of unpaid leave with continued benefits.

One cost of cancer usually borne by patients and their families is the time and money associated with medical appointments. These costs include transportation to and from medical offices or clinics, time lost from work and leisure, child care, and housing and incidental costs for out-of-town trips to specialty care centers. In fact, the nonprofit organization CancerCare (www.cancercare.org) reports that getting help with transportation costs is the most commonly requested and provided service it offers.

A number of organizations offer financial assistance to cancer patients. State Medicaid plans cover the cost of care for needy patients, and there is additional assistance available through some states’ Free Care pools. The National Breast and Cervical Cancer Early Detection Program covers costs associated with cases of cancer detected through one of the national screening programs. Pharmaceutical companies and nonprofit groups have patient assistance programs in place to help with the cost of cancer drugs, either by providing them free or at heavily discounted rates. Although there are hundreds of these patient assistance programs, they are underpublicized and underused.

Financial impact on employers: Cancer-related costs to employers include medical costs paid by employer-sponsored insurance plans, disability costs, and lost productivity. In addition, other people may have to fill in for the cancer patient, or a part-time or temporary person may need to be hired. In a study of one of America’s largest companies, researchers analyzed insurance claims for medical care, absenteeism, and disability costs for all patients who were diagnosed with cancer between 1995 and 1997 and compared these expenditures with a sample of people who were similar in sex, job function, and type of health plan. They found that the average excess cost of cancer patients was more than $83,000, and total annual health care costs for cancer patients were more than five times higher than for similar people without cancer. The cost of medical care was only about half of the total incremental cost to the employer. The cost of disability payments and absences from work made up the other half of costs borne by the employer.

In 2010, cancer-related costs for employers were estimated at $264 billion, with $125 billion in direct medical costs and $139 billion in indirect costs. These indirect costs include loss of time, productivity, and YLL.

Efforts to contain costs: Most medical care in the United States is paid for by a third party, such as Medicaid (for the poor and disabled), Medicare (for people over the age of sixty-five), or a private or employer-sponsored insurance company. These third-party payers have instituted a number of measures to contain costs associated with treating cancer. For example, most new drugs are required to show cost-effectiveness before payers will add them to their formularies (lists of approved treatments). Other cost-containment measures include cost-sharing, required preauthorizations, and retrospective claim denials. The idea behind cost-sharing is to correct a so-called irrationality in the market: the fact that patients are insulated from the true cost of their health care leads them to have higher demand for goods and services than they otherwise would. Cost-sharing has been criticized as unjust because distributing health care benefits according to the ability to pay discriminates against the poor and lower-middle classes.

By law, Medicare is not allowed to set or negotiate prices for reimbursing physicians, hospitals, and drug companies. In the case of cancer drugs, since 2003 Medicare has been overhauling its systems with the intention of eliminating incentives that favor aggressive and expensive treatments over equivalent alternatives. Historically, the problems have arisen because the Medicare reimbursement rate for many drugs was far higher than the actual cost of purchasing them. Medicare was and is required by law to cover cancer drugs if they are being used for their Food and Drug Administration–approved indication or another approved indication. The resulting profits around certain cancer drugs have been shown to influence prescribing patterns. Medicare officials are also concerned about overtreatment, such as screening and monitoring procedures that are conducted more often than the evidence and guidelines recommend. In reaction to these and other issues, Medicare administrators have instituted a number of steps toward increasing the transparency and quality of cancer care.

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