CMS News

Per-person spending for health care services by Americans and their public and private health plans varied by nearly $2,000 from state to state in 1998, according to a report by the Centers for Medicare & Medicaid Services (CMS) published today in the journal Health Affairs.

Health care spending in 1998, the most recent year for which state level data are available, ranged from an average of $4,810 per resident in Massachusetts to $2,731 in Utah.

Medicare spending per enrollee in the same year ranged from $7,219 in Louisiana to $3,936 in South Dakota.  The range of Medicaid per enrollee spending was from a high of $9,474 in New York to a low of $2,825 in Tennessee.

“Research has suggested many reasons for differences in health care spending among states,” CMS said, “including socioeconomic and demographic factors, incidence of illness, access to and type of insurance coverage, availability of resources (hospital beds and physicians), and diversity in practice patterns.”

Because the CMS estimates were constructed using a consistent methodology across states, they provide a resource for researchers to analyze health-spending patterns among states and are useful as baselines to measure the impact of proposed policy changes.

The state spending data released today are the first produced since 1991. Although CMS has released national health spending data for 2000, the latest state figures available are for 1998 and represent a subset of national health expenditures called personal health care.

Personal health care includes health care services and products such as hospital care, physician services, and prescription drugs.  It excludes public health programs, administration, research, and construction of health facilities that are included in national health expenditure.

In 1998, personal health care expenditures totaled $1.0 trillion with a national average per resident of $3,759.  At the state level, per capita health spending tended to be higher in the Northeast and lower in the western states.

Four states had average health spending of 15 percent or more above the U.S. average in 1998: Massachusetts, New York, Connecticut, and Rhode Island.  Five states had average spending of at least 15 percent below the national average: Utah, Idaho, Arizona, Nevada, and New Mexico.

Between 1991 and 1998, average annual growth in per capita health spending ranged from 3.5 percent in California to 7.3 percent in Maine.  The Far West showed the slowest regional per capita growth between 1991 and 1998 at 3.8 percent, while the Plains region showed the fastest average annual growth at 5.9 percent.

The states with the slowest health spending growth over this span were California, Arizona, Nevada, Washington, Colorado, and Florida.  Fastest growth was in Maine, Mississippi, West Virginia, North Carolina, and South Carolina.

The Medicare share of total personal health care spending in 1998 was lowest in Alaska with 9.1 percent and highest in Florida with 28.1 percent. In 1998 Florida had the largest share of Medicare enrollees to total population, 19 percent, and Alaska the smallest, 6 percent.

The proportion of a state’s population enrolled in Medicare and the distribution by age of enrolled beneficiaries help to explain the variation in Medicare spending among states.

South Dakota’s low per enrollee Medicare expenditures can be attributed to low utilization rates of short stay hospital, physician and supplier, and home health agency services.

In Louisiana Medicare short stay hospital spending per enrollee was higher than average, and higher than average utilization and payments per enrollee for home health services boosted its per-enrollee Medicare spending.

Medicaid’s share of total personal health care expenditures was highest in New York at 31.5 percent and lowest in Nevada at 9.1 percent.

Variation in Medicaid spending by state results from individual states’ flexibilities in eligibility requirements, benefits, and payment policies, as well as different federal matching rates and state-specific budget constraints.

New York’s high Medicaid expenditures were a result of a higher than average percent of the population with poverty level incomes and a large number of people with serious health problems such as HIV infections, high medical prices, and generous eligibility standards.

The article “Health Care Spending in 1991-1998: A Fifty-State Review,” appears in the July/August issue of Health Affairs.