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Experts on all sides of the health reform debate agree that the current rate of growth in health care spending is unsustainable and ultimately damaging to the economy and the health system alike. Patients experience this stress in a more personal way, through rising out-of-pocket costs or by struggling to get the care they need. Most agree that measures to control health care costs are essential to health reform if we are to have a financially sustainable health care system. There is less agreement, however, on how to accomplish this while maintaining—not to speak of improving—quality, access, and consumer satisfaction.

To enact reforms that have a positive impact on health care costs, we must first understand how and where we are spending our health care dollars today. This issue brief provides an overview of health care spending in the U.S., comparing U.S. spending to the rest of the world, Michigan spending to other U.S. states, and spending by payer (Medicare, Medicaid, and commercial).

Issue Brief December 2009

Health Care Spending by country, state, and payer

Overview of Health care Spending in the U.S. and Michigan . . . . . . . . . . . . . . . . . . . 2

Spending Comparisons: BCBSM, Medicare, and Medicaid . . . . . . . . . . . . . . . . . . . 8

Spending by Location of Services, U.S. and Michigan . . . . . . . 3

Personal Health Care Spending by Payer . . . . . . . . . . . . . . 4

Public Funds: Medicare . . . . . . . . . . 5

Public Funds, Medicaid . . . . . . . . . . 6

Medicaid Spending: State Comparisons . . . . . . . . . . . . . . 7

Growth in Health Care Spending, U.S. and Michigan . . . . . 3

C E N T E R F O R H E A L T H C A R E R E S E A R C H & T R A N S F O R M A T I O N

The Center for Healthcare Research & Transformation (CHRT) illuminates best practices and opportunities for improving health policy and practice. Based at the University of Michigan, CHRT is a non-profit partnership between U-M and Blue Cross Blue Shield of Michigan designed to promote evidence-based care delivery, improve population health, and expand access to care.

Visit CHRT on the Web at: www.chrt.org

Suggested citation: Kofke-Egger, Heather; Ehrlich, Emily; Udow-Phillips, Marianne. Health Care Spending by Country, State, and Payer. December 2009. Center for Healthcare Research & Transformation. Ann Arbor, MI.

0 1000 2000 3000 4000 5000 6000 7000 8000 9000

Utah 51Arizona 50

Idaho 49New Mexico 48

Nevada 47Georgia 46

Texas 45California 44Colorado 43

Virginia 42Arkansas 41Oregon 40

Oklahoma 39Hawaii 38

Louisiana 37Michigan 36

Mississippi 35Montana 34

Washington 33South Carolina 32

Alabama 31North Carolina 30

Wyoming 29Illinois 28

Indiana 27South Dakota 26

Iowa 25Kansas 24

New Hampshire 23Missouri 22

Tennessee 21Kentucky 20

Florida 19Maryland 18Nebraska 17

Wisconsin 16Ohio 15

Minnesota 14New Jersey 13

North Dakota 12Pennsylvania 11

West Virginia 10Vermont 9

Rhode Island 8Delaware 7

Connecticut 6Alaska 5

New York 4Maine 3

Massachuse�s 2District of Columbia 1

United States $5,283

$8,295 $6,683 $6,540 $6,535 $6,450 $6,344 $6,306 $6,193 $6,069 $5,954 $5,933 $5,808 $5,807 $5,795 $5,725 $5,670 $5,599 $5,590 $5,483 $5,473 $5,464 $5,444 $5,432 $5,382 $5,380 $5,327 $5,295 $5,293 $5,265 $5,191 $5,135 $5,114 $5,092 $5,080 $5,059 $5,058 $5,040 $4,941 $4,917 $4,880 $4,863 $4,822 $4,717 $4,638 $4,601 $4,600 $4,569 $4,471 $4,444 $4,103 $3,972

2 • CHRT Center for Healthcare Research and Transformation

The U.S. spends more on health care than any other country in the world as a percentage of gross domestic product (GDP). In 2004 (the most recent year for which comparative data are available) the percent of GDP spent on health care in the U.S. was 15.2 percent, 33 percent higher than the next highest spending country (Switzerland).1

As a state, Michigan spent 13.5 percent of gross state product (GSP) on personal health care in 2004, similar to the national average of 13.3 percent. In 2004, personal health care spending in the U.S. $1.6 trillion; Michigan spent $49.6 billion on personal health care in 2004.2

At $5,058, Michigan ranks 36th in the country on per capita spending on health care – lower than the national average of $5,283 (Figure 1).

Overview of Health care Spending in the U.S. and Michigan

1 OECD Health Data, 2008, Organisation for Economic Co-operation and Development. Note: The OECD uses total health care expenditures to make spending comparisons on a per capita basis. Total health care expenditures include personal health care expenditures plus government administration, public health activities, research, and capital expenditures.

2 National Health Expenditure Data, Health Expenditures by State of Provider, 1980-2004, Centers for Medicare and Medicaid Services, Office of the Actuary. Note: NHEA uses personal health care expenditures (a subset of total health care expenditures) to calculate state spending figures. Total health care expenditures include personal health care expenditures plus government program administration, public health activities, research, and capital expenditures.

Source: National Health Expenditure Data, Health Expenditures by State of Residence, 1992-2004, Centers for Medicare and Medicaid Services, Office of the Actuary.

Figure1: Per Capita Personal Health Care Expenditures, by State of Residence, 2004

Other Medical

Prescription Drug

Home health

Dental

O�ce-based medical services

Emergency Room

Outpatient Hospital

Inpatient Hospital

Inpatient Hospital

Outpatient Hospital

Emergency Room

Dental

Homehealth

Prescription

Other Medical


24.7%

12.7%

5.1%

27.1%

6.4%

1.7%

20.2%

2.0%

Other Medical

Prescription Drug

Home health

Dental


Emergency Room

Outpatient Hospital

Inpatient Hospital

29.5%

8.6%

3.6%

23.5%

7.3%

4.0%

21.4%

2.0%

Inpatient Hospital

Outpatient Hospital

Emergency Room

Dental

Homehealth

Prescription

Other Medical


0

1000

2000

$3,478

$4,000

$5,000$5,283

MichiganUnited States

2004200320022001200019991998199719961995199419931992

$3,478

$3,573

$3,689

$3,834

$3,954

$4,075

$4,090

$4,195

$4,300

$4,449

$4,637

$4,637

$5,058

Michigan

United States $3,586 $3,686 $3,753 $3,855 $3,941 $4,038 $4,156 $4,283 $4,421 $4,644 $4,891 $4,891 $5,283

Issue Brief: Health Care Spending by Country, State, and Payer • December 2009 • 3

Since 1992, Michigan’s average annual rate of increase in personal health care spending has been 5.8 percent, significantly below the national average of 6.7 percent. At 45th, Michigan ranks among the lowest of the 50 states and District of Columbia on the rate of increase in personal health care spending from 1992 to 2004.3 In 2004, per capita personal health care spending in the U.S. was $5,283 – 19 percent higher than in 2000 and 47 percent higher than in 1992 (Figure 2).

Source: Calculations based on National Health Expenditure Data, Health Expenditures by State of Residence, 1992-2004, Centers for Medicare and Medicaid Services, Office of the Actuary

Figure 2: Per Capita Personal Health Care Expenditures, Real Dollars (inflation-adjusted), 1992-2004

3 National Health Expenditure Data, Health Expenditures by State of Provider, 1980-2004, Centers for Medicare and Medicaid Services, Office of the Actuary.

In Michigan and the U.S., more than one-third of personal health care spending went for care in a hospital setting, and medical office visits accounted for more than one-quarter (Figure 3). Prescription drugs, while accounting for a lower share, have been one of the fastest-growing components4.

In 2007, Michigan ranked somewhat lower than the national average in expenses per hospital day at 28th in the country.5

4 CMS: National Health Expenditure Accounts, Historical —

5 American Hospital Association Survey, 2007. Copyright 2009 by Health Forum LLC, an affiliate of AHA. Special Data request by Kaiser Family Foundation.

Spending by Location of Services, U.S. and Michigan

Figure 3: Distribution of Personal Health Care Expenditures by Place of Service, 2006

Growth in Health Care Spending, U.S. and Michigan

MichiganUnited States

Source: Medical Expenditure Panel Survey, 2006

Other

Private Insurance

Out of Pocket

Medicaid

Medicare

Other

Private Insurance

Out of Pocket

Medicaid

Medicare

6.6%Other

19.6%Medicare

17.4%Medicaid

17.7%Out of Pocket

38.8%Private

Insurance

3.7%Other

22.6%Medicare

14.2%Medicaid

13.8%Out of Pocket

45.8%Private

Insurance

Other

Private Insurance

Out of Pocket

Medicaid

Medicare

Other

Private Insurance

Out of Pocket

Medicaid

Medicare

6.6%Other

19.6%Medicare

17.4%Medicaid

17.7%Out of Pocket

38.8%Private

Insurance

3.7%Other

22.6%Medicare

14.2%Medicaid

13.8%Out of Pocket

45.8%Private

Insurance


Michigan

United States

In 2004, combined Medicaid and Medicare spending accounted for more than one in three health care dollars spent in the United States. While spending through private insurance accounted for just less than 40 percent of health care spending in the U.S., in Michigan that number was more than 46 percent, reflecting Michigan’s relatively high rate of private coverage. Nationally, “out of pocket” (consumer) payments accounted for 18 percent of spending, while in Michigan – largely because of the greater contribution of private insurance – out of pocket payments represented a smaller portion of spending at 14 percent.

Personal Health Care Spending by PayerFigure 4: Personal Health Care Expenditures by Coverage Type, U.S. and Michigan, 2004

Source: National Health Expenditure Accounts by State of Provider, 2004 and Medical Expenditure Panel Survey, 2004. Note: “Other” includes Veterans’ Affairs, Indian Health Service, on-site employee health services, and other similar programs.

$0 $2000 $4000 $6000 $8000 $10000

South Dakota 51 Montana 50

New Mexico 49 Hawaii 48 Idaho 47 Iowa 46

North Dakota 45 Maine 44

Wyoming 43 Vermont 42 Oregon 41

Utah 40 Wisconsin 39

Washington 38 New Hampshire 37

Virginia 36 Minnesota 35

Arkansas 34 Nebraska 33 Colorado 32

Arizona 31 Kentucky 30

North Carolina 29 West Virginia 28

Kansas 27 South Carolina 26

Rhode Island 25 Indiana 24

Missouri 23 Tennessee 22

Georgia 21 Alaska 20

Nevada 19 Alabama 18

Ohio 17 Oklahoma 16

Pennsylvania 15 Illinois 14

Mississippi 13 California 12 Delaware 11 Michigan 10

Massachuse�s 9 Connecticut 8

New York 7 Texas 6

Florida 5 New Jersey 4

Maryland 3 Louisiana 2

District of Columbia 1

United States $7,439

$9,154$8,659$8,535$8,512$8,462$8,292$8,221$8,185$8,168$7,860$7,726$7,693$7,644$7,604$7,520$7,415$7,343$7,250$7,248$7,128$7,044$7,041$7,029$6,973$6,925$6,919$6,903$6,861$6,841$6,808$6,642$6,590$6,532$6,529$6,435$6,373$6,302$6,200$6,198$6,142$6,116$6,028$6,019$6,015$5,823$5,767$5,764$5,708$5,652$5,650$5,640


In 2004, per capita spending for Medicare in Michigan was higher than the national average – $7,860 compared to $7,439 for the U.S. overall

– making Michigan the 10th highest state in Medicare spending. In 2004, per capita spending for Medicare among all states ranged from $5,640 to $9,154.

Public Funds: MedicareFigure 5: State Comparisons, Medicare Spending per Enrollee, 2004

Source: Health Expenditure Data, Health Expenditures by State of Residence, Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

Personal Health Care Spending by Payer

Michigan

Rest of the United States

State

Federal

Total U.S. Spending $319.7 billion

Michigan

Federal 56%

State 44%

Michigan Medicaid Spending

$9.3 billion


In 2007, total U.S. spending for Medicaid was $319.7 billion. At $9.3 billion, Michigan Medicaid spending represented 2.9 percent of the U.S. total, with 56 percent financed by the federal government and the remaining 44 percent financed by the state.

Public Funds, Medicaid

Figure 6: Total Medicaid Spending, FY 2007, and Distribution of Michigan Share, FY 2007

Source: Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on data from Centers for Medicare and Medicaid Services-64 reports, March 2009.

0.72

1.431.401.071.061.041.031.031.021.011.001.000.990.960.950.950.950.930.930.930.920.900.900.900.890.890.880.870.870.860.860.850.850.820.760.740.730.730.730.720.690.690.630.630.630.630.580.560.430.420.370.00

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Tennessee 51New Jersey 50

Rhode Island 49New York 48California 47

District of Columbia 46Florida 45

Michigan 44Illinois 43Maine 42Ohio 41

Indiana 40Missouri 39

Hawaii 38New Hampshire 37

Pennsylvania 36Texas 35

Minnesota 34Utah 33

West Virginia 32Wisconsin 31Kentucky 30Colorado 29Maryland 28

Mississippi 27Massachuse�s 26

Alabama 25Arkansas 24Georgia 23Virginia 22Oregon 21

Louisiana 20South Carolina 19

Washington 18Kansas 17

Vermont 16North Carolina 15

South Dakota 14Iowa 13

Connecticut 12Delaware 11

Oklahoma 10Nebraska 9

North Dakota 8Idaho 7

Montana 6Nevada 5Arizona 4

New Mexico 3Alaska 2

Wyoming 1

United States


There is significant variation in Medicaid spending among states. In 2006, the range was from $2,206 to $8,484 per enrollee. In 2006, Michigan was at $4,199, slightly lower than the U.S. average of $4,575.6

There are many reasons for the differences in state spending levels. Eligibility, benefits, and reimbursement policies all vary by state. The Medicaid-to-Medicare physician fee index (Figure 7) removes the effect of eligibility and benefit variations and looks only at differences in physician payments.7

The data in this chart show that Michigan has one of the lowest rates of Medicaid payments to physicians in the country, ranking 44th.

6 Urban Institute and Kaiser _ Commission on Medicaid and the Uninsured estimates based on data from Centers for Medicare and Medicaid Services-64 reports, March 2009.

7 The Medicare to Medicaid physician fee index measures each state’s Medicaid physician fees relative to national average Medicare fees. A ratio greater than 1.0 indicates that state’s physician fees are greater than the national average; a ratio lower than 1.0 reflects less generous payments.

Medicaid Spending: State Comparisons Figure 7: State Comparisons, Medicaid-to-Medicare Physician Fee Index, All Services, 2008

Source: Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on data from Centers for Medicare and Medicaid Services-64 reports, March 2009.

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Medicaid 2006Medicare 2004BCBSM 2006

$ 3,285

$ 7,860

$ 4,199


Spending Comparisons: BCBSM8, Medicare9, and Medicaid10

While spending data for all commercial payers were not available for Michigan or the U.S., Blue Cross Blue Shield of Michigan (BCBSM) provided data for this report that offer a comparative perspective on the commercially insured population.

Per capita spending by private insurance varies from Medicare and Medicaid spending given the different demographics of the covered populations. Medicaid

spending is heavily weighted toward the elderly and disabled populations; Medicare spending is primarily focused on those 65 years and older.

8 Blue Cross Blue Shield of Michigan, Special Data Request, August 2009. Administrative and medical expenditures; excludes member liability.

9 National Health Expenditure Data, Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group.

10 Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on data from Centers for Medicare and Medicaid Services-64 reports, March 2009.

Center for Healthcare Research & Transformation2929 Plymouth Road, Suite 245 • Ann Arbor, MI 48105-3206Phone: 734-998-7555 • [email protected] • www.chrt.org

Figure 8: Average Spending Per Enrollee in Michigan: BCBSM, Medicare, Medicaid

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