Health Care Spending

As it absorbs more and more of the national income, health care spending in the United States is coming under increasing scrutiny. Personal health care expenditures in this country totalled $585 billion, or $2,255 per capita, in 1990. Personal health care represented 10.7 percent of the U.S. gross national product in 1990, compared with 6.4 percent in 1970. To better understand what drives U.S. health care spending, this report determines the (1) per capita spending for health services in each state, (2) reasons for the differences in spending levels from one state to the next, and (3) extent to which state cost-containment policies have contributed to lowered health spending.

GAO found that: (1) in over half of the states, health spending is within 10 percent of the U.S. average personal health care expenditure per capita; (2) most of the states with the highest health spending are concentrated in the Northeast, Midwest, and Far West, while the Southern and Rocky Mountain states tend to spend less than the national average on health care; (3) between 1982 and 1990, annual per capita personal health expenditures nearly doubled, from $1,200 to $2,255; (4) state differences in personal income, the supply of health care resources, the concentration of hospital services in urban areas, and health status explain over 80 percent of the differences in health spending among the states in 1982; (5) generally, per capita health care spending was higher in states with higher personal income, greater hospital bed capacity, and a larger number of physicians per capita; (6) other factors such as geographic variations in medical practice patterns may also cause state differences in health spending; (7) personal income, health status, and other nonpolicy factors that strongly influence per capita health spending limit the ability of state health policies to constrain the level of health spending; and (8) mandatory hospital rate regulation and all-payer systems appear to reduce hospital costs in the states that implement them.