Significant Disparity Persists in State Medicaid Spending

Spending on Medicaid was the most dynamic variable among states, according to a CMS report about total personal health care spending.
by , | December 7, 2011
 

Overall personal health care spending fluctuated significantly among the states between 1991 and 2009, according to data released Wednesday by the Centers for Medicare and Medicaid Services.

The differences were attributable to numerous economic and demographic factors. Spending on Medicaid in particular was the most dynamic variable among states because population factors and the states' unique policies led to greater disparity.

Differences in Medicaid spending were far more substantial than those for Medicare spending or overall personal health care spending, according to the report. The state that had the highest per enrollee average for Medicaid (Alaska) spent 253 percent more than the lowest spending state (California). That compares to a 57 percent difference between the highest and lowest spending states in Medicare, and an 84 percent difference for total health care spending.

"A complex mix of policy, economic and demographic factors" contributed the wide disparity between state Medicaid spending, CMS wrote in its report. State programs differ in the kind of benefits they offer, the eligibility requirements for enrollment and the payments made to health care providers. The report also noted that a state's per capita income influences overall spending on the program. It affects both the amount of resources a state can devote to Medicaid and the number of people who qualify for its coverage.

Of the 10 states with the highest per capita spending on Medicaid -- Alaska, Connecticut, New Jersey, Rhode Island, New York, New Hampshire, North Dakota, Montana, Minnesota and Maryland -- six were in the top 10 for overall spending and most had higher averages of income per capita. A higher percentage of Medicaid enrollees in most of those states were elderly as well, according to the report.

The bottom 10 -- Florida, Hawaii, Mississippi, Illinois, Arizona, Michigan, Tennessee, Alabama, Georgia, and California -- generally had lower per capita income, but the study noted that California is distinctive for its nationally low Medicaid payment rates for providers. On a regional basis, the CMS numbers suggest that the Southeast and Far West tended to have lower average spending on Medicaid, while New England and the Mideast had the highest averages. The variation between state Medicaid spending has narrowed -- there was a 353 percent difference between the highest and lowest spending states in 1998 -- but it still remains more significant than Medicare or overall spending.

In a roundtable discussion hosted by the Kaiser Family Foundation, Gigi Cuckler, an economist in the Office of the Actuary at CMS; Dan Crippen, executive director of the National Governors Association; and John Holahan, director of the health policy research center at the Urban Institute, reviewed the findings. Cuckler noted the impact of the recent recession, which slowed the growth in health care spending because of job losses and the subsequent losses in health insurance. All three referenced the impending impact of the Affordable Care Act, which will particularly expand enrollment in Medicaid.

The variation between state spending on Medicaid should continue to narrow, Crippen explained, because there will be nationally standard eligibility requirements as part of the ACA, but Holahan speculated that it would be difficult to predict how that would affect per-enrollee spending, as some states would still have significant economic and demographic factors that determine their Medicaid expenditures. The effect of the health insurance exchanges on premiums and other private insurance spending is also uncertain, Crippen said.

"We need to think more about the supply side of things. We want to make sure we have enough supply to absorb" these new enrollees, Crippen said. The rate of cost increases "is worrisome," he acknowledged, but policymakers should also be focused on how to improve the utilization of services -- "the supply side" -- which would allow the health care providers to simultaneously handle a greater numbers of patients and drive down costs. For example, states should focus on access to primary care, which can often prevent more costly hospitalizations, a step that many states are already exploring, he said.

Some of the economic and demographic trends in Medicaid spending spilled over into overall spending figures. For example, eight of the top 10 states in overall spending on personal health care -- Alaska, Connecticut, Maine, Delaware, New York, Rhode Island, New Hampshire, North Dakota and Pennsylvania -- fall in the top third in average personal income. The top-spending states also had a higher share of their population that was elderly, according to the report. Notably, six of the top 10 states in overall spending were also in the top 10 for Medicaid spending.

The gap between the highest-spending and lowest-spending states has widened slightly, according to the report, having been consistently between 71 to 73 percent from 1998 to 2005 before increasing to 84 percent in 2009.

On the other end, the 10 lowest-spending states -- Utah, Arizona, Georgia, Idaho, Nevada, Texas, Colorado, Arkansas, California and Alabama -- had lower average income and, by extension, more residents who were uninsured. Yet they also tended to have younger populations that were healthier overall, with lower rates of obesity and fewer smokers, the report noted.

"There's no magic number for the right level of spending," Crippen said, but "a healthier population would bring down costs."

The numbers for the study were based on the CMS Office of the Actuary's National Health Expenditure Accounts. "Personal health care spending includes the total amount spent to treat individuals with specific medical conditions, but excludes expenditures resulting from government administration, net costs of health insurance, government public health activity, non-commercial research, and investment in structures and equipment," according to CMS.

Data

The Kaiser Family Foundation has built an interactive website that displays most of the data included in the CMS report.

Select your state below to view CMS figures for Medicaid spending.

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