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State by State Health Spending

By July 12, 2017Commentary

Per capita health spending varies by state, partly due to policies and partly due to differing price and income levels across states.  An analysis performed by the CMS Office of the Actuary examines per capita health spending by state from 1991 to 2014.   (HA Article)   The researchers attempted to capture spending on a state’s residents, regardless of where the care was received, and to identify trends by major payer type.  Spending ranged from $11,064 per person in Alaska in 2014 to $5,982 in Utah.  The national average was $8,045.  New England, the MidEast, Great Lakes and the Plains states tend to have higher than average spending.  From 2010 to 2014, nationally per person health spending grew by 3.1%.  The rate of increase was 4.8% in Alaska and only 1.9% in Arizona, which has a lot of people covered by Medicare.  Some states that had high per capita spending had lower recent growth rates and vice versa.  Few states experienced dramatic changes in their spending rank, although Oregon did manage to move up quite a few places and Louisiana and North Carolina moved down.  There were few differences among states based on whether or not they chose to expand Medicaid coverage under the reform law, except that those who did expand coverage had a decline in per capita Medicaid spending, probably because the new enrollees were younger and healthier.

Regional income patterns explain about 60% of the total per person variation in health spending at a state level over the full study period, or 80% if a time trend was included in the analysis.  Economic impacts related to the differential state impacts of the recession and the recovery affected income and consequently health spending in the period during and after the most recent recession.  Medicare eligibility was unaffected by the reform law and so its spending change was less variable, although it does vary from $12,614 in New Jersey to $8,238 in Montana.  Prices, beneficiary characteristics and provider practice patterns account for much of this difference.  South Dakota had anomalously high spending growth, largely due to hospital expenses.  Differences in health spending across states can provide useful analysis for understanding trends in that spending, but much appears due to non-health factors like income and demographics.

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