Health care costs per person vary across 50 states, Washington

Health care spending is rising in the United States, but the 50 states have different per capita spending and rates of increase.

“Varied Health Spending Growth Across US States Was Associated With Incomes, Price Levels, and Medicaid Expansion, 2000-19,” was published in August in Health Affairs. The study updated the 2014 estimates of health spending per person across the 50 states and Washington, D.C., up to the year before the COVID-19 pandemic.

Researchers aimed to illuminate “changes in health spending during a period with substantial changes in health policy at the state and federal levels,” including the Affordable Care Act (ACA) of 2010 and its provisions for Medicaid expansion after 2014.

“Official state-specific spending estimates that date back to 2014 are not recent enough to enable analyses that consider newer policies or changing state characteristics,” the study said. “In addition, structural, legal, economic, and demographic features vary across US states and types of payers, resulting in substantial variation in health spending across states and payers that is challenging to interpret.”

In 2014, residents of Utah had the lowest annual spending per person at $5,982, while Alaskans spent the most, $11,064 per person per year. Five years later, those states retained their ranks at lowest and highest amounts – $7,250 a year for Utah residents, $14,500 for Alaska residents, according to the analysis.

Primary data came from sources including the U.S. Centers for Medicare & Medicaid Services, the American Hospital Association, the U.S. Commerce Department’s Bureau of Economic Analysis, and the Medical Expenditure Panel Survey.

Who covers health care costs?

Among the key findings for 2019:

• In 2019, Medicare as a percentage of total health spending ranged from 9% in Alaska, to 30% in Florida.
• Medicaid as a percentage of total health spending ranged from 10% of total health spending in South Dakota, to 26% of total health spending in Washington, D.C.
• Private insurance as a percentage of total health spending ranged from 25% in West Virginia to 49% in Washington, D.C.
• Out-of-pocket payments as a percentage of total health spending ranged from 12% in Washington, D.C., to 42% in Alaska.

Researchers noted the expansion of Medicaid “had a complex relationship with state spending growth.” But emerging trends about the effects of the ACA show increased state and national spending is associated with increased access to care, especially for financially disadvantaged patients.

Where does the money go?

Researchers analyzed spending categories including hospitals, physicians/clinics, nursing facilities, home health, dental, pharmaceutical, and other professional spending categories. In all states, hospitals and physician and clinical services received the most from health care spending per person.

• Hospital spending, as a percentage of total health spending, ranged from 35% in New Jersey to 51% in South Dakota.
• Physician and clinical services, as a percentage of total health spending, ranged from 16% in Vermont to 30% in Alaska.

What affects health care spending?

There were six non-health-system factors tested to explain variation in health spending per person. They accounted for 77.2% of variation in state per capita health spending from 2000 to 2019:

• Income (25.3%)
• Regional price parity (21.7%)
• Price growth over time (12.8%)
• Behaviors such as physical activity levels and smoking (8%)
• Population density (4.8%)
• Age and sex profiles (4.6%)

For income and regional prices, wealthiest states with the highest prices had the highest estimated per capita spending, while lower income states had lower spending, despite having greater need for health care “because of systematically worse health.”

The researchers noted 22.8% of spending was left unexplained. “This finding calls for a reexamination of possible factors underlying the often piecemeal, state-specific approach to addressing the rising cost and uneven quality of health care,” the study said.

This article was published by our sister publication Medical Economics.