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Tuesday, Sept. 18, 2007
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Christopher Fleming

CMS Study: New England, Mideast Regions Spend Significantly More On Health Care Than Other States

States With Most Generous Medicaid Benefits Also Have Highest Spending


Bethesda, MD -- People who live in the New England and Mideast regions of the United States spend significantly more on health care than those who live elsewhere in the nation, the federal government reported today in the journal Health Affairs. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.26.6.w651

Nine northeastern states (MA, ME, NY, CT, DE, RI, VT, WV, PA) and Alaska spent 20 percent more than the U.S. average on health care services in 2004 ($6,345 per capita versus $5,283) -- a wide disparity partly attributable to the concentration of physicians, the age distribution of a state’s population, residents’ income levels, and the number of people who lack health insurance, say officials from the Centers for Medicare and Medicaid Services (CMS) in the journal’s September 18 Web edition.

“Most of these states have consistently had the highest spending over time,” says report coauthor 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.”

Four states (MA, NY, CT, DE) had high per capita personal income. Six states (MA, NY,CT, RI, VT, and PA) had among the highest concentrations of physicians to population and among the lowest shares of the uninsured population, the authors say.

In contrast, states in the Southwest and Rocky Mountain regions spent less than the national average. These states (including UT, AZ, ID, NM, and NV) spent about $4,244 per person in 2004 -- one-fifth less than the U.S. average. These states typically had lower-than-average per enrollee Medicare and Medicaid spending and, because they tend to have more rural areas, less access to and availability of physicians and hospitals.

The report on state health spending, prepared by economists and actuaries from the CMS Office of the Actuary, National Health Statistics Group, is an update of one issued in 2002 that covered the period 1991-1998. This report, based on data from the National Health Expenditure Accounts, expands on the last one by examining what is driving spending differences from 1998 through 2004, the most recent year for which data are available.

A Tale Of Two States

The two beacons of state health reform -- California and Massachusetts -- varied widely in their spending patterns. California’s per capita spending level was 12 percent below the national average in 2004. California had a below-average percentage of the population under age sixty-five, an above-average share of the uninsured population, and a higher proportion of residents enrolled in health maintenance organizations (HMOs) in 2004 as compared to Massachusetts.

At nearly 27 percent above the national average in 2004, Massachusetts had the highest per capita health care spending ($6,683) of all states. It also ranked near the top for per capita hospital, nursing home, and home health spending and for spending on Medicare and Medicaid.

Role Of Medicaid And Medicare

States with generous Medicaid programs also tended to have the highest spending. Massachusetts’ per enrollee Medicaid spending was $9,150 in 2004. In addition, New York’s per enrollee Medicaid spending was $10,173 -- among the highest. Medicaid accounted for nearly 32 percent of total health spending in the state, nearly double the national average. Maine also offers a very generous Medicaid program, providing greater coverage of long-term care and support for those with disabilities.

Nevertheless, the number of people enrolled in Medicaid doesn’t affect spending levels. New York and New Mexico have larger-than-average populations who receive Medicaid. New York was among the highest Medicaid spenders on health care, while New Mexico was among the lowest ($4,944, compared to the U.S. average of $6,119).

With the highest percentage of residents over age 65, Florida’s Medicare per enrollee spending was among the highest in the nation ($8,462, compared to the U.S. average of $7,439). Although Maine also has a higher-than-average proportion of elderly people, its Medicare per enrollee spending was among the lowest ($6,015).

Prescription Drug Spending

The report also found that per capita spending on prescription drugs grew faster in 1998-2004 than in 1991-1998. This happened in every state (except Colorado) and the District of Columbia. The faster growth is attributable to expanded prescription drug coverage, lower copayments, an influx of blockbuster drugs, and expanded Medicaid and state-sponsored coverage for drugs.

In the Far West region, average annual per capita drug spending grew 12.5 percent between 1998 and 2004, up from 6.9 percent from 1991 to 1998. The Southeast experienced the fastest increase in per enrollee Medicaid drug spending growth, most of which was concentrated in Tennessee.


In a Perspective, Commonwealth Fund president Karen Davis and Commonwealth senior vice president Cathy Schoen call the CMS research “an important addition to our understanding of state variations in health spending.” Davis and Schoen say that “ultimately, federal leadership will be needed” to reform our health system, but “in the meantime, state initiatives serve as valuable learning laboratories.” http://content.healthaffairs.org/cgi/content/abstract/hlthaff.26.6.w664

In a second Perspective, John Holahan, director of the Urban Institute’s Health Policy Center, focuses on the variation in Medicaid spending across states.A national solution will be needed to eliminate the extensive variations that the current system has brought,” Holahan says, but he suggests that politics and budget considerations will make reaching such a solution difficult. “The result of a stalemate will be that low-income people will continue to be treated very differently depending on where they live,” he observes. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.26.6.w667


Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org.


©2007 Project HOPE–The People-to-People Health Foundation, Inc.