The U.S. spent an all-time high of $4.1 trillion on health care in 2020, representing almost 20% of the gross domestic product. [1] Unlike other countries, the question of who pays that expense is spread out among different government and private funders who each follow different rules, leading to vastly divergent costs. To make things more confusing, the cost of health care varies even more based on where you live.
For example, a resident of the Bronx, New York, accounts for almost $8,000 a year in health care spending, almost double the annual cost of a resident of Honolulu, Hawaii. But even in the same area, different insurers spend varying amounts on patients. Private insurers spend an average of $5,592 per patient in the Bronx, while Medicare spends almost three times as much on Bronx residents.
Researchers from Yale, Stanford, and Dartmouth, revealed these cost disparities in a study published in July in JAMA Network, a medical journal. They found that when it comes to how much health care costs where you live, there’s almost no correlation with how healthy the population is.
“The most shocking finding in some ways was that spending is completely uncorrelated with mortality,” says Jonathan Skinner, a research professor in Dartmouth College’s department of economics who co-authored the study.
Why is health care spending so all over the place?
There’s no obvious answer, Skinner says. The areas with the lowest spending “tend to be somewhat rural,” he says, while the New York metropolitan area is well-represented among the highest-spending areas. “New York is a very special place. It’s incredibly expensive, not just for prices, but also they tend to just have a lot of health care.”
But it’s not the case that the most expensive areas overall are the most expensive areas when it comes to health care. Otherwise you’d expect to see San Francisco above places like Gulfport, Mississippi, the sixth-highest-spending area for health care despite a median income well below the national average. [2]
There’s a wide range of spending within regions as well, depending on who’s paying. Medicaid recipients in Rochester, New York, account for $8,239 in health care spending, among the highest rates in the country, while Rochester residents with private health insurance average $3,177, among the lowest rates in the country.
This in-region variation is especially surprising because the amount of health care people consume, as measured by the number of inpatient bed days used, is “very similar across Medicaid, Medicare, and private insurance, even though these are people at different ages and they’re in the hospital for different reasons,” Skinner says. So in terms of how much health care people use, different regions have their own “medical signature” while “prices are seemingly almost random,” he says.
The researchers examined possible reasons for this disparity and found that the prices private insurance companies negotiate with health care providers are strongly associated with overall costs. However, more research and more data are needed to confirm what drives these wide ranges in health care spending. Private insurance companies account for more than 40% of health insurance spending in the U.S., much more than Medicare and Medicaid, so they have a big say in how much health care costs.
“There’s something going on, whether physician practice styles, hospital capacity, and particularly the market pricing mechanisms. How aggressive are hospitals charging? How much does the state Medicaid program cover? All of those different factors play a role,” Skinner says
Where health care costs the most
These are the 20 regions that spend the most on health care, based on a composite of private, Medicare, and Medicaid spending.
1 | The Bronx, NY | $7,705 |
2 | White Plains, NY | $7,426 |
3 | Manhattan, NY | $7,397 |
4 | Anchorage, AK | $7,318 |
5 | Huntington, WV | $7,141 |
6 | Gulfport, MS | $7,135 |
7 | Abilene, TX | $7,128 |
8 | East Long Island, NY | $7,116 |
9 | San Angelo, TX | $7,004 |
10 | Owensboro, KY | $6,872 |
11 | Longview, TX | $6,784 |
12 | Wichita Falls, TX | $6,775 |
13 | Sioux Falls, SD | $6,775 |
14 | Bismarck, ND | $6,755 |
15 | Terre Haute, IN | $6,732 |
16 | San Mateo County, CA | $6,721 |
17 | Minot, ND | $6,719 |
18 | Fort Worth, TX | $6,689 |
19 | Ridgewood, NJ | $6,682 |
20 | Beaumont, TX | $6,656 |
Where health care costs the least
These are the 20 regions that spend the least on health care, based on a composite of private, Medicare, and Medicaid spending.
1 | Honolulu, HI | $4,184 |
2 | Bloomington, IL | $4,392 |
3 | Boulder, CO | $4,436 |
4 | San Bernardino, CA | $4,685 |
5 | Hinsdale, IL | $4,757 |
6 | Tucson, AZ | $4,765 |
7 | Olympia, WA | $4,768 |
8 | Colorado Springs, CO | $4,777 |
9 | Pueblo, CO | $4,799 |
10 | Palm Springs/Rancho Mira, CA | $4,813 |
11 | San Diego, CA | $4,841 |
12 | Fresno, CA | $4,852 |
13 | Springfield, IL | $4,864 |
14 | Seattle, WA | $4,869 |
15 | Reno, NV | $4,902 |
16 | Evanston, IL | $4,914 |
17 | Petoskey, MI | $4,919 |
18 | Peoria, IL | $4,941 |
19 | Montgomery, AL | $4,965 |
20 | Mobile, AL | $4,976 |
How to reduce health care spending
This study shows that lowering health care costs won’t be easy, because America doesn’t have just one health care system.
“There are basically three overlapping health care systems and they’re completely different,” Skinner says.
Your costs can vary depending on who’s paying for your health care: private insurance, Medicaid, or Medicare. And your entire health care experience can change depending on where you’re getting treated.
While Medicare and Medicaid cover many of your costs, if you have private insurance, the amount of health care spending in an area can affect how much you pay in premiums and out of pocket. Your health care costs could vary by thousands of dollars a year depending on your city, so it may be something to consider when deciding where to live or work.
“You may want to think about whether you want to go someplace where health care is so expensive,” Skinner says.
Image: Maskot / Getty
