Health Spending By State Of Residence Shows Regional Differences

There are significant state and regional differences in what Americans spend for healthcare according to a recent study by The Centers For Medicare and Medicaid examined the trends in healthcare spending by state.

The study found that the New England and Mideast regions claimed eight of the top ten states in per capita personal health care spending in 2004, while the states with the lowest per capita spending were typically located in the Southwest and Rocky Mountain regions.

The study also compared high or low per capita spending in a state to demographic and economic forces such as provider supply, the age distribution of a state's population, personal income levels, and insurance rates. 

Variation in state-specific spending and growth rates appears to arise from many different sources--payer mix, provider supply, or demographic and socioeconomic influences--reiterating that national trends reflect components of local experience.

With further study, this data can provide valuable information for health care reform proposals and evaluations.

Key findings from the study include:

• Annual health care spending per person totaled $6,409 in New England and $6,151 in the rest of the Northeast, compared to a national average of $5,283. The totals include spending on individual health care from all sources, including insurance, personal expenses, Medicare, Medicaid and other sources, for 2004, the most recent figures available. Highest per capita spending was recorded in the District of Columbia, $8,295, followed by Massachusetts, $6,683; Maine, $6,540; and New York, $6,535.  “Most of these states have consistently had the highest spending over time,” said report co-author Anne Martin, an economist with the CMS Office of the Actuary. “There is no one clear explanation, but there are several similar characteristics among these states.”
  
  
• Top states in per capita health spending in 2004. In 2004, the ten states with the highest per capita personal health care spending were Massachusetts, Maine, New York, Alaska, Connecticut, Delaware, Rhode Island, Vermont, West Virginia, and Pennsylvania. These ten states consumed an average of $6,345 per person in 2004--nearly 20 percent higher than the U.S. average of $5,283.
  
  
• States lowest in per capita health spending in 2004. In 2004, the states with the lowest per capita personal health spending were Utah, Arizona, Idaho, New Mexico, and Nevada. They accounted for an average of $4,244 per person in 2004--nearly 20 percent lower than the U.S. average. Although not always the case, these states also tended to exhibit lower-than-average per enrollee Medicare and Medicaid spending. In addition, because of their less populous nature, there may be less access to and availability of physicians and hospitals.  Demographic similarities of these states, such as lower median age and a smaller proportion of the population age sixty-five and older, may lead to less health care use.
  
  
• Relationship of per enrollee Medicare and Medicaid spending to total per capita spending. The study also explored the relationship between total per capita personal health care spending and per enrollee Medicare and Medicaid spending relative to the national average in 2004. For Medicare, nearly half of all U.S. states (twenty-three) exhibited an inverse relationship. For example, per capita personal health care spending in Texas and Louisiana were below the U.S. average, but Medicare per enrollee spending was above the national average. Conversely, states, such as Maine, Vermont, and North Dakota, showed higher-than-average per capita personal health care spending yet lower-than-average Medicare per enrollee spending.
  
  
• State border-crossing patterns in 2004. Residence-adjusted estimates also permit one to compare the health spending incurred by those residing in a state versus all health spending on medical services and products that occurs within a state's borders. This comparison allows for an understanding of a state's inflows (spending incurred by out-of-state residents in a state) and outflows (spending incurred by a state's residents for services outside of their own state). Several reasons for residents to travel either into or out of a state to use health care include proximity to the state's border, ease of travel, attractiveness of major health care centers, and availability of specialists.
  Net-flow ratios over 100 percent were highest for Wyoming, Idaho, West Virginia, New Mexico, and Vermont. For these states, ease of travel influences residents' decisions to seek treatment outside their state. Net-flow ratios were lowest in the District of Columbia, North Dakota, Tennessee, South Dakota, and Minnesota.
  
  
• Differences in spending trends: 1991-1998 versus 1998-2004.
  Personal health care spending. The study analyzed per capita health spending trends across states and regions for two time periods: 1991-1998 and 1998-2004. The trends in the earlier period were affected, in part, by cost and utilization controls of managed care plans, particularly health maintenance organizations (HMOs), whereas the trends in the later period were affected by a retreat from these tight controls.

Spending for hospital services. Driven by trends in California, per capita spending on hospital services in the Far West grew much faster during the 1998-2004 period (6.5 percent annually) than during the 1991-1998 period (2.2 percent annually).

Per capita hospital spending growth accelerated between these two periods for all regions. This trend was influenced by greater use of hospital services (growth in the number of admissions in community hospitals was faster, 1.6 percent per year, during 1998-2004, compared to a decline of 0.4 percent per year between 1992 and 1998) and faster growth in hospital wages and professional liability costs than experienced during the 1990s.

Drug spending. As occurred with hospital spending, per capita prescription drug spending grew faster in the 1998-2004 period than in the 1991-1998 period. This trend occurred in every state (except Colorado) and the District of Columbia, the result of a universal set of factors that included expanded private prescription drug coverage and use associated with lower copayments, an influx of new blockbuster drugs, efforts to substitute prescription drug treatments for other forms of care, and expanded public coverage under Medicaid and other state-initiated programs.

Some regions and states were more affected than others because of a higher prevalence of prescription drug use.

Spending trends and managed care. The difference between the highest- and lowest-spending regions (on a per capita basis) widened from 1991 to 1998 and then narrowed from 1998 to 2004; a similar trend occurred for states.

Spending trends and public policy changes. Factors such as public policy changes also had an impact on the 1998-2004 spending trends. For example, the Balanced Budget Act (BBA) of 1997 greatly reduced Medicare payments for many services (most notably hospital, home health, and nursing home services) across all states.

To view the complete study and results, visit http://content.healthaffairs.org.

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