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State Variation in Spending

By April 1, 2013Commentary

The National Center for Policy Analysis is the latest group to weigh in on the subject of geographic variation in health spending, releasing a report detailing state-by-state cost differences.  (NCPA Report)   One way that they look at the analysis is health spending as a percent of a state’s economy.  In this approach, Wyoming is the lowest, at about 8.86% of its GDP, with Virginia and Delaware also low.  Maine is the highest at 21.7%, with West Virginia and Mississippi also very high.  When you look only at Medicare spending, West Virginia remains high at 5.4% of state GDP, with Mississippi and Florida at about the same level.  The low states are Alaska at about 1.1% and Wyoming and Colorado are also in that range.  For Medicaid, Maine is the highest at 4.9% of state GDP and New York and Vermont are also at the top, while Nevada is the lowest in Medicaid at 1%, with Virginia and Colorado also at the bottom.  There is a modest correlation between overall low or high spending and the same status for Medicare or Medicaid spending.  The amount of total variation among states also has tended to stay the same over the last three decades, although variation in Medicaid spending has declined, probably due to nationalization of the program.  On a per capita basis, there is also significant variation, with Massachusetts the highest at about $9278 per person and Utah the lowest at $5031.  There is again a modest correlation between spending as a percent of state GDP and per capita spending.  The same is true looking only at Medicare or Medicaid spending.  What is useful to know is that on a per capita basis, the same states may have very different ranking for different payer types, so no universal statement can be made about why one state is higher or lower overall.  Overall, a very complex picture of variation exists, one that cannot be easily explained as simply due to ineffective or inefficient care in high-spending states.

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