Is American health care really the most expensive in the world? It depends where you live

It’s no secret that Americans pay more for health care than anyone else in the world. We spent an average of $9,402 for each person in 2014 when all costs are considered. In Canada, the figure was just, $5,291, and in France, which was rated the best health care system in the world in 2000, it was $4,959. The average of all major countries was even lower, about $3,500.

But the United States is a large and diverse country, and some regions are more affordable than others. A recent study published in the journal Health Affairs revealed how much variation there is.

The study estimated spending per person by the three largest coverage programs – Medicare, Medicaid and private insurance. The national average for these programs was $8,045 (lower than total average costs because it only included spending by the three programs). Alaska was the highest spending state at $11,064, and Utah, which was the lowest, came in at just over half that, $5,982. Pennsylvania and New Jersey were both above average at $9,258 and $8,859.

New England was the most expensive region at $10,119 and the Rocky Mountains the least expensive at $6,814. The Mid-Atlantic was near the top at $9,370.

The rate of growth in spending growth also varied greatly. In 2014, it rose by 7.7% in Oregon but by only 2.4% in New Hampshire.

These findings mean that there is more variation in health care spending within the U.S. than between the U.S. and many other major countries. What’s going on?

Several factors have been known for some time to account for health spending variation. Health care uses a lot of labor, so differences in wages are important. Heavy use of health care services also drives up costs, so differences in the number of hospitals and doctors also play a role.

The authors of the study also found that higher cost states had higher personal incomes and more people enrolled in Medicare and Medicaid and lower cost states had higher rates of uninsurance.

National events are also important. Regions that fared better in the recession and that recovered more quickly tended to spend more on health care.

And, of course, the Affordable Care Act played a key role, especially its expansion of Medicaid. While states that expanded the program saw increases in total Medicaid spending, they also saw large decreases in average spending per enrollee. This was because the new beneficiaries tended to be healthier than the existing ones, so the pool of beneficiaries was healthier overall.

Spending under private insurance increased more rapidly in non-expansion states, in part because larger proportions of residents signed up for coverage on the ACA exchanges. Fewer poor residents in these states had the option of using Medicaid, which tends to have lower per enrollee costs.

So, when it comes to reducing health care costs, the United States has something to learn from itself. Expanding coverage may increase costs to the system overall, but it can cut average costs per person. That means more widespread coverage allows costs to be spread more efficiently across both those who are healthy and those who are sick. When costs are spread in this way, the system is both fairer and more effective.

That’s a basic premise behind the ACA, and this study suggests it is working. Congress should pay attention before it brings in the wrecking ball.

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