Intended for healthcare professionals


Hospitalisation rates explain differences in Medicaid costs across US

BMJ 2011; 343 doi: (Published 11 July 2011) Cite this as: BMJ 2011;343:d4361
  1. Bob Roehr
  1. 1Washington, DC

The rates and costs of hospitalisation explain much of the difference in states’ spending on beneficiaries of Medicaid, the US joint federal and state health insurance programmes for people on low incomes, a new study concludes.

Secondary factors were regional differences in the cost of living and of healthcare and the age and mix of patients, the study found (Health Affairs 2011;30:1316-24, doi:10.1377/hlthaff.2011.0106).

Average annual spending per Medicaid beneficiary across the US was $5163 (£3210; €3610) during the study period, 2001 to 2005. The 10 highest spending states averaged $1650 above that figure, while the 10 lowest spending averaged $1161 below it.

The mid-Atlantic region (New York, New Jersey, and Pennsylvania) was the most expensive in the Medicaid programme, said Todd Gilmer, the study’s lead author and a professor of health economics at the University of California at San Diego.

“They spend more in every area . . . There is more utilisation of hospital stays and higher costs per stay,” he said at the 7 July forum where the issue of the journal was released.

“New York state spends about twice as much per beneficiary as California [$8450 versus $3168 a year]. A lot of that is driven by the hospitalisation rates,” Mr Gilmer said. “In California there are very aggressive negotiations by the Medicaid programme with hospitals to control costs.”

Health maintenance organisations such as Kaiser Permanente are a long established and powerful force in the California healthcare market but have little presence in New York, which might explain some of the difference.

Similarly, Washington state has worked to improve access to primary care, which has changed the mix of how its Medicaid dollars are spent, said Mr Gilmer. Spending on outpatient visits and prescriptions were each about 15% above the national average, while spending on more expensive acute care and hospitalisation were 18% and 35% below the national average.

“What surprised us a little bit was the strength and consistency of [access to] primary care,” Mr Gilmer said. They found that the supply of primary care physicians per population and the amount spent per primary care visit were associated with decreased morbidity and lower rates of hospitalisation “across the states,” he said.

He found it encouraging that health reform under the Affordable Care Act is moving to strengthen primary care.

Most such research has focused on Medicare, the health insurance programme for elderly people run and paid for by the federal government. Medicaid is a hybrid programme in which individual states set standards for eligibility and the scope of services covered and often add their own funding to the federal disbursal.

On the same day, the California HealthCare Foundation released a first year report on Oregon’s expansion of its Medicaid programme (

Oregon only had funds to add 10 000 beneficiaries, far short of the number of people who would meet the qualifying criteria, so in 2008 it established a lottery to select whom to cover from the 90 000 people who applied. It was a unique opportunity to create a randomised study.

Among the initial findings from the first year were that Medicaid coverage increased the likelihood of people using outpatient care by 35%, using prescription drugs by 15%, and being admitted to hospital by 30%. Uptake of recommended preventive care such as mammography and cholesterol monitoring also rose.


Cite this as: BMJ 2011;343:d4361

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