How Much Has State Spending On Healthcare Increased?

In 2018 healthcare costs in America will outpace inflation.  It may come as a surprise to many, but that’s the first time since 2010 that’s happened.

Yep.  As Bloomberg puts it:

Health-care inflation has been partly restrained by limits on how much Medicare pays hospitals and physicians under the ACA and other legislation, combined with overall slow growth in prices throughout the economy.

Since the signing of the Affordable Car Act in 2010 much of the focus and debate about healthcare has been at the national level.  Spending on healthcare at the national level has outpaced the growth of the economy since 1970:

But state spending on healthcare over time has varied widely.  I used data from The Census Bureau and state sources (compiled through usgovernmentspending.com) to map out the change in state and local spending on healthcare per capita from 1992 – 2016.

Here’s the data for 1992:

 

 

Those numbers are in 1992 dollars.  That was quite a long time ago, so it’s hard to mentally compute those dollars to something more recent.  So I adjusted those for inflation to 2016 dollars:

Here’s the same data adjusted for 24 years of inflation to 2016 dollars:

 

 

So you see where I’m going here.  If healthcare spending increased at the same level as inflation from 1992 – 2016, then we should see the actual 2016 spending numbers to be similar to the ones in the map above.

Well, here’s the actual numbers for state and local healthcare spending per capita in 2016:

 

 

And now let’s see the difference between the two.

 

 

As you can see, all states saw healthcare spending per capita increase faster than the inflation rate.  I didn’t have to use negative numbers.

The three states with the lowest increase are:

• Georgia – 11%
• New Hampshire – 26%
• Louisiana – 58%

The three states with the highest increase are:

• Vermont – 261%
• Delaware – 252%
• New Mexico – 231%

 

Medicaid Expansion

An analysis of state spending on healthcare would not be complete without discussing Medicaid expansion.  First, what is it?

Medicaid expansion is a provision in the ACA which expands Medicaid eligibility to cover more low income Americans.  Specifically, it extends Medicaid coverage to those making up to 138 percent of the federal poverty level ($16,753 a year for an individual or $34,638 for a family of four). 

Who pays to cover these additional Medicaid recipients?  The Federal government (meaning: all taxpayers) pays 90% of the costs, leaving 10% of the costs to the states. 

To date 35 states have expanded Medicaid and 15 have not.  Here’s the map:

 

 

You might be thinking, why wouldn’t a state vote to expand Medicaid if the Federal Government is going to pay 90% of it? 

Well, the additional 10% is no small change.  Most state budgets are not in good shape, and states have been apprehensive of expanding Medicaid for fear or being able to afford it. 

Some pundits have claimed that Medicaid expansion has been detrimental to the states who have passed it.  This analysis from the Brooking Institute disputes that. 

Bottom line, if you live in a state that has not voted to expand Medicaid and you pay federal income taxes, your tax money is helping fund the Medicaid expansion in other states.

 

Going Forward

The ACA has been around now for about 8 years and survived many death threats.  Given the hyper-divisive political climate in America today, it would be fruitless to attempt to predict it’s future.  It might also be foolish to count on the ACA surviving in perpetuity.

States however have significant ability to implement improvements and test innovation in healthcare.  Arguably, healthcare policies could be optimized across the board by being tuned to the needs of states. 

States vary widely in size, population, and demographic breakdown.  They have wildly different regulatory environments.  And their respective populations do not necessarily face the same medical issues. 

As an example, the obesity rate in Mississippi is 37.3%, but in Colorado it’s 22.6%.  So no surprise, Mississippi’s type-2 diabetes rate is more than twice Colorado’s.  Giving states more control over their healthcare environment could help address issues unique to their people.

As a geographer by trade, geoarbitrage interests me as a future desire in retirement, but also as a topic to explore with data.  And of course it’s a great strategy to help accelerate your journey to financial independence.

I hope to continue to research various aspects of finance as related to geography going forward.  Be sure to check out my Geoarbitrage Resources Page that has tons of great tools to help you find your perfect location.

And I certainly hope you find these kinds of posts helpful.