New study outlines wide gap in health care spending across 50 states

There is a wide and growing health care spending gap among states, a new report has found. Some states spend twice as much on health care per person as other states, the report said.

The study, conducted by the Institute for Health Metrics and Evaluation (IHME) at the University of Washington’s School of Medicine and published in the journal Health Affairs, looked at health care pending in all 50 states from 2015 to 2019.

The researchers found that at the end of that time period, state-specific per person spending ranged from $7,250 to $14,500. Per-capita health care spending increases ranged from 1.0% in Washington, D.C. to 4.2% in South Dakota between 2013 and 2019 (after adjustment for inflation).

The most important factors in the variation were incomes and consumer prices among states. In other words, states with higher wealth and higher consumer costs saw greater spending. “Our analysis suggests that a sizable share of the variation in health care spending is associated with non-health-care system factors like household income and consumer prices,” says Emily Johnson, Health Expenditure Researcher at IHME and a lead author of the study. “However, there is a major part of the spending variation that is not explained by the major non-health system factors and therefore represents variation caused by differences in how states run their health systems. Policymakers in states with higher health care costs can learn a lot from other states that deliver high-quality health care more efficiently.”

Where there is more wealth, there is higher spending

The report’s findings outlined a system that varies dramatically depending on location—and although it could be argued that it makes sense that prices are higher in areas that can pay more, the researchers note that health care is not just any commodity—that spending less has a real impact on people’s lives.

“Income and regional consumer prices combine in such a way that wealthy states with the highest prices consistently had the highest estimated health spending per person,” the report said. “At the same time, those living in states with lower mean income had lower spending despite having a generally higher need for health care in poor regions because of systematically worse health.”

Higher health spending also indicates more health care providers, the report says: “Substantial evidence suggesting that general increases in the supply of the clinical health care workforce improve overall health care efficiency through increases in the effectiveness of medical care service provision.”

Medicaid expansion = 1% increase in costs

The article also discusses how the ACA’s Medicaid expansion has affected costs. The report adds that Medicaid expansion under the Affordable Care Act (ACA) was associated with increases in spending per person, but the median of spending in expansion states showed slower growth in out-of-pocket spending than the same spending in non-expansion states.

After the passage of the ACA, some states launched a legal challenge to the health care law. In 2012, the Supreme Court ruled that states could opt out of the Medicaid expansion, and 12 states, including Alabama, Florida and Georgia, continue to do so.

The Health Affairs study found that Medicaid expansion was associated with a 1% increase in health care costs across all states. The researchers added that this is a small variation and pales in comparison to the other factors such as income and consumer prices.

“For children, expanding Medicaid eligibility was associated with lower health care spending, likely due to increased access to preventive medicine, and for pregnant women, increasing eligibility was associated with lower out-of-pocket spending,” the report says. It adds that average growth rates for out-of-pocket spending were lower in states that expanded access to Medicaid (0.3% for Medicaid expansion states vs. 1.2% for non-expansion states) and that growth rates for private insurance spending were also lower in those states (1.1% for Medicaid expansion states vs. 2% for non-expansion states).

Related: California study links increased primary care spending to better outcomes

“We know from previous studies that when states enact Medicaid expansion, people have greater access to health care and, by some measures, better health outcomes,” says Dr. Joseph Dieleman, Associate Professor in the Department of Health Metrics Sciences at the University of Washington and a lead author of the study. “For the first time, there’s reliable research that reports the costs for all payers of expanding eligibility for Medicaid, including tracking changes to out-of-pocket spending.”

The study’s authors say their work is one step toward better understanding the costs of health care in the U.S., and adds that the piecemeal, state-by-state system that the U.S. currently has suffers from high costs and uneven quality.