June 2000 (Vol. 1, No. 2)
How Expensive is Health Care in Wisconsin?
by David A. Kindig, MD, PhD

The recent lawsuit by Attorney General James Doyle against the U.S. Health Care Financing Administration (HCFA), prompted by the fact that our Medicare payments per person are below the national average, has called increased attention to health expenditures in our state. This follows several decades of concern about national and state health expenditures, given that the percentage of our Gross Domestic Product devoted to health care has risen from 5.1% in 1960 to 13.9% projected for 1999. With this history, the fact that US health expenditures are already the highest in the world, and with the increased medical prices which are expected in the coming years, we need to know how much we spend for health care in Wisconsin, in relation to other areas of the country and within the state as well. This is especially important as we investigate the health outcomes we get for our investment.

But it is not easy to get accurate and current data on health expenditures. Even the national expenditure levels estimated annually by the Office of the Actuary of HCFA are based on major data collection efforts. Public expenditures such as for Medicare and Medicaid can be determined from public records, but almost all of private expenditures including those for drugs, long term care, copayments and deductibles must be estimated 1.

National health expenditures are reported as “personal” expenditures or total expenditures. “Personal” includes expenditures for individuals to hospitals, physicians, dentists, drugs and equipment, long term care and home care services. These account for about 89 percent of the total expenditures, with the other 11% from expenditures for public health, administration, research and construction. Parallel data for states are infrequently reported; the most recent HCFA estimate in Wisconsin was in 1995 using 1993 data 2.

In 1993, the national average per capita expenditure for personal health care was $3020 ranging from $3892 in Massachusetts to $2070 in Idaho. At $2875. Wisconsin was 5% below the national average for personal health care expenditures. Considering the components that make up this per capita expenditure, Wisconsin was 35% above the national average for drugs and non-durables, almost equal to national average for physicians and 13% below the national average for hospital care. Table 1 shows several of the high and low expenditure states.


1993 Per Capital Personal Health Care Expenditures


Massachusetts $3892
Connecticut $3727
New York $3693
Wisconsin $2875
Utah $2214
Wyoming $2123
Idaho $2070

It is important to consider how these per capita figures should be adjusted for accuracy; for example, the “border-crossing” adjustment was quite high (more than 10%) in Wyoming, Idaho, North Dakota, and Minnesota. In others like Florida, Connecticut, Indiana, Ohio, and Oregon the adjustment accounted for less than 0.5%. In Wisconsin, the adjustment was about 1.7% 3. Most Medicare data are now adjusted for this factor, and reflect the patient’s residence instead of the site of care. Other adjustments also need to be considered, such as wage rates, age, and ideally some indicator of “burden of disease”. In 1998, the Wisconsin Department of Health and Family Services estimated personal expenditures for the year 1996, using a model based on Medicare, Medicaid, and hospital expenditures. This method, which has not been empirically validated, produced a figure of $3362 per person, just over the US average, and a 6.8% increase from similar estimates in 1995 4.

In 1993, Wisconsin accounted for 1.86% of national personal health expenditure. If we had the same percentage of the 1999 total expenditures, our total spending would have been 1.86% of the 1.019B national total, or about $3608 per capita. Such an extrapolation is crude, and should be interpreted with caution. For Medicare, more current accurate data are available. Figure 1 shows the range in per capita Medicare expenditures across the states in year 1997, with Wisconsin at $3795, ranking 43rd of the 50 states. It is this level that prompted the Attorney General’s recent suit 5.

Does significant variation exist across sub state areas? Data are even harder to come by for such questions. In Wisconsin, data are reported for hospital inpatient and outpatient charges by county, adjusted for county of patient residence 6. For 1998, there was a range from $220 per capita in Douglas County to $1651 in Milwaukee County for inpatient hospital charges. For hospital outpatient surgery there was a range from $63 in Rock County to $295 in Dunn County. These data are not adjusted for residents who are hospitalized or have ambulatory surgery out of state. There is a slight inverse relationship between a county having high hospital charges and lower ambulatory surgery charges. It would be important to have data on other components of health expenditure such as physician services out of hospital, drugs, nursing homes, etc. In 1997, Wisconsin Act 231 authorized the Department of Health and Family Services to collect data from physician offices and emergency departments. Certainly, similar adjustments listed for states would also need to be considered at the county level to provide a fair basis for comparison.

For such an important policy question, data are quite limited. There are opportunities to improve this situation. First, HCFA should be encouraged to make state estimates every 5 years or less. Second, perhaps we could make more accurate estimates using private databases from health insurers in cooperation with public agencies. Third, with such wide ranges in per capita expenditures, private and public policy makers should be thinking about what rates are optimal. This is not a question with current easy answers, and needs to be at the forefront of research and policy. We know that there is a limited correlation between health expenditures and health outcomes, so it is not likely that the maximum is the best 7. On the other hand, the lowest expenditure states and counties are likely to have room for improvement.

The Network's Health Value Discussion Group is spending this year attempting to get better data and some answers to these questions to guide public and private policy makers in Wisconsin.


References

1 Levit, K et al. National Health Expenditures. Health Care Financing Review Fall 1996, 18 (1): 175-214.
2Levit, K et al. State Health Expenditure Accounts: Building Blocks for State Health Spending Analysis. Health Care Financing Review Fall 1995, 17(1); 201-254.
3 Basu, J. Border-Crossing Adjustment and Personal Health Care Spending by State: Health Care Financing Review Fall 1996, 18(1): 215-236.
4 Wisconsin Department of Health and Family Services Wisconsin Health Expenditures 1996. June 1998.
5 Medicare Disparity Stings Wisconsin. Wisconsin State Journal “Our Opinion” Sunday, March 12, 2000
6 OHCI On Line. Hospital and Outpatient Surgery Charges, 1998.badger.state.wi.us/agencies/oci/ohci/qcmain.htm
7 Kindig , D. Take a Look at Higher Medicare Rates: Are they Fair? Wisconsin State Journal “Guest Column, Sunday, April 9, 2000