Determinants of Per Capita State-Level Health Expenditures in the United States: A Spatial Panel Analysis

Abstract

Abstract. The United States ranks third in 2013 among the nations of the world in per capita health care expenditures. However, there is wide variation in health care across states. paper explores factors that influence the per capita outlays in health care across the United States between 2000 and 2009. A Spatial Durbin Panel Model is used to account for the possibility that the health care expenditures of any particular state may influence health care expenditure patterns in neighboring states in the same way. Results indicate that, apart from the presence of positive spatial dependence in health care across the states, variables such as a state's gross domestic product (GDP), Medicaid expenditures, proportion of the population that is elderly, number of active physicians per 100,000 people, and poverty rate positively influence per capita state-level health expenditures. GDP (by state), proportion of population above age 65, and poverty rate negatively affect the neighboring states' per capita health expenditures. Furthermore, the number of hospital beds per 1,000 people and number of hospitals per 1,000 people positively influence bordering states' per capita health expenses.(ProQuest: ... denotes formulae omitted.)1. IntroductionIn 2010, the United States spent 18% of its GDP ($2.6 trillion) on health care (Bipartisan Policy Center, 2012). was a significantly higher proportion than other major industrialized nations spent in 2010, including the United Kingdom (9.6% of its GDP), Germany (11.6%), and Japan (9.5%) (Bipartisan Policy Center, 2012). In 1960, the United States spent 5% of its GDP on health care, which grew to 16% in 2004 and then to 17% in 2009 (Health at a Glance, OECD Indicators, 2011). Thus, it can be seen that within the last 50 years, the total United States health care expenditures as a share of GDP has more than tripled. Also, health care expenditures have grown 2% faster than the U.S. GDP over the past 22 years (U.S. Healthcare Cost, Report on Healthcare Spending, 2013). Furthermore, the United States spends twice as much per capita on health care expenditures as any other advanced nation in the world (Rugy, 2013). Although this growth has declined in recent years (Roehrig et al., 2012), it has been predicted that health will reach 19.6% of the GDP by 2016 (Poisal et al., 2007) and 20% of the GDP by 2021 (Bipartisan Policy Center, 2012). Hall and Jones (2007) predicted that on health care is likely to increase to over 30% of GDP by the year 2050.Despite ranking at the top of the list in spending, the United States health care system ranks thirty-seventh in the world (World Health Report, 2000). Among the OECD countries studied in the National Vital Statistics Report by MacDorman et al. (2014), the United States has the highest prevalence of infant mortality. It lacks in many measures of health care outcomes and quality (Bipartisan Policy Center, 2012). Therefore, it is evident that improvement in the quality of health care has not paralleled the growth exhibited in health care expenses. As stated in the report by the Bipartisan Policy Center (2012, p. 4), This rapid growth in health expenditures is creating an unsustainable burden on America's economy, with far-reaching consequences. Due to the presence of such problems and mismatch with spending, it is necessary to carefully examine the structural aspects of the health care system across the states that contribute to inefficiency and wasteful spending (Bipartisan Policy Center, 2012, p. 4).To understand the factors that result in health expenditure variations across the United States, it is important to frame health policies in ways that not only limit cost growth but also prevent decline in the quality of health care (Martin et al., 2002). It will help to control the factors that led to such growth in the cost structure of the health sector and reduce the waste of the economy's output by reallocating it to other sectors. …