NCPA - National Center for Policy Analysis

Why Does Medicaid Spending Vary Across States?

July 8, 2011

It is well known that Medicaid spending per beneficiary varies widely across states.  However, less is known about the cause of this variation, or about whether increased spending is associated with better outcomes.  In a new article, Todd P. Gilmer, a professor at the University of California, San Diego, and Richard G. Kronick, the deputy assistant secretary for health policy, Office of the Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, describe and analyze sources of interstate variation in Medicaid spending over several years.

They find substantial variations both in the volume of services and in prices.

  • Overall, per capita spending in the 10 highest-spending states was $1,650 above the average national per capita spending, of which $1,186, or 72 percent, was due to the volume of services delivered.
  • Spending in the 10 lowest-spending states was $1,161 below the national average, of which $672, or 58 percent, was due to volume.
  • In the mid-Atlantic region, increased price and volume resulted in the most expensive care among regions, whereas reduced price and volume in the South Central region resulted in the least expensive care among regions.

Understanding these variations in greater detail should help improve the quality and efficiency of care, say Gilmer and Kronick.

Source: Todd P. Gilmer and Richard G. Kronick, "Differences in the Volume if Services and in Prices Drive Big Variations in Medicaid Spending Among U.S. States and Regions," Health Affairs, July 7, 2011.

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