Per-person health spending levels climbed, study finds

Washington -- A retreat from strict forms of managed care has helped drive up growth in national per-capita health spending, according to a recent Centers for Medicare & Medicaid Services report. Average annual per-person expenditures increased 6.3% from 1998 to 2004, compared with a 4.8% increase between 1991 and 1998.

Managed care plans, especially HMOs, held spending in check during the 1990s, said CMS economist Anne Martin, who co-authored the study. Expenditures rebounded when HMOs became less popular and other options, such as PPOs, became more so.

In addition, spending on prescription drugs increased in every state except Colorado and in the District of Columbia. This was because of expanded private drug coverage and use associated with lower co-payments, an influx of new blockbuster drugs, efforts to substitute drug treatments for other forms of care, and expanded public coverage, stated the report, published Sept. 18 in Health Affairs.

Using data from the National Health Expenditure Accounts, the federal government's official estimate of health care spending, the study found that expenditures varied widely by region. New England had the highest average annual per-capita spending in 2004, at $6,409. That compares with a national average of $5,283.

New England residents were older and wealthier than the national average and had greater access to physicians, the study noted.

New York, Delaware and Alaska were the only states outside New England that approached that region's spending levels. This is likely because New York and Delaware residents had high personal income levels, the study explained. New York also had a large concentration of physicians and high Medicaid spending.

In Alaska, medical costs may have been higher because its residents are relatively isolated and unable to access alternative, more efficient care, the authors noted.

The Southwest and Rocky Mountain regions had the lowest levels of spending, at $4,542 and $4,557 per resident, respectively. The states tend to be more rural, and patients had less access to hospitals and physicians, the study stated. The two regions also had below-average spending on Medicare and Medicaid enrollees.

Age could be another factor. Utah, the state with the lowest average per-capita spending, had the youngest population, with a median age of 28.

Massachusetts had the highest spending level after the District of Columbia. Massachusetts Medical Society President Dale Magee, MD, attributed his state's ranking to the higher age of its population and its low number of uninsured. He also noted the higher per-capita income of residents and the dominant role the medical industry plays in the state's economy.

The presence of numerous academic medical centers in the state also is a factor, said Dr. Magee.

Health care spending in Massachusetts will increase as the state implements its 2006 health system reform law, Dr. Magee predicted. As of July 1, most of the state's residents were required to obtain health insurance.