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Health Spending by State

By December 27, 2011Commentary

The Medicare and Medicaid Research Review carries an article on spending per capita by state of residency, with Medicare and Medicaid broken out separately.  The research was put together by workers at CMS’ Office of the Actuary.   (MMRR Article)   In 2009, average per capita health spending was $6815.  New England’s spending was around 29% higher than that average and the Mideast region was 17% higher.  On the other side, the Rocky Mountain and Southwest areas were about 15% lower than the average.  Even within quintiles of states, there is significant variation, with the top quintile spending from about $7700 to $9278 and the lowest quintile spending $5031 to $6272 per person.

The highest spending states were Massachusetts, Alaska, Conecticut, Maine, Delaware and New York and the lowest were Utah, Arizona, Georgia, Idaho, Nevada, Texas and Colorado.  California is also near the bottom.  Somewhat surprising that many low-spending states are home to substantial older, retiree populations, but they also have many healthy young people and the older population has unit prices fairly well-controlled by Medicare.  The high-spending states tend to have higher per capita incomes, more women age 20 to 44 and a higher than average proportion of the elderly.  Income is the strongest correlate to per capita health spending, which is consistent with the long-standing economic literature that the more money people have, the more they are willing to spend on health care.  The low-spending states tend to have low rates of obesity and smoking.

The states with high Medicare spending per person are New Jersey and Florida.  Their spending is about 15% above average, which is a very striking difference given that Medicare unit prices are relatively uniform.   The higher spending Medicare states tend to have more female and more African-American beneficiaries.  States with more beneficiaries as a proportion of their population tend to have higher average spending.  Medicaid has a different pattern, with little association between number of recipients and average spending.  Medicaid differences can be associated with different eligibility criteria and different benefit designs among the states.  Alaska, Connecticut, New Jersey, Rhode Island and New York are higher than average spenders and Florida, Hawaii, Mississippi, Illinois and Arizona are lower than average spenders.  For the last decade their has been relative persistence in the rank of a state, although some had faster or lower than average growth.

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