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Differences in Medicaid spending, state by state

Rita Schwenk, 71, holds up medication which she receives under the new Medicare prescription drug benefit program January 18, 2006 in Portland, Maine.

Steve Chiotakis: A study out today in the journal Health Affairs gives a side-by-side comparison of how states spend money on Medicaid the government health insurance program for the poor.

From the health desk at WHYY in Philadelphia, Marketplace's Gregory Warner tells the tale of two populous states.


Gregory Warner: So, which state do you think spends more per Medicaid patient -- New York or California?

OK, time's up.

Todd Gilmer: New York.

Todd Gilmer is a health economist at U.C. San Diego and author of today's study in Health Affairs. He says New York state spends two-and-a-half times as much, and one reason is price. The average cost of one night in a New York hospital for an adult on Medicaid is $2,100. In California, it's $1,320.

Gilmer: One of the reasons California spends less is they negotiate more actively with hospitals that have lower payment rates than New York.

And Gilmer says that when hospitals are paid more, they admit more patients and keep them there longer.

Gilmer: That seems to be what's happening in New York. I would question whether New Yorkers are better off, being hospitalized at a greater rate than Californians.

Hospitalization is the biggest single chunk of Medicaid spending. Which makes Gilmer's next finding especially interesting. States with more primary care physicians sent fewer people to the hospital. Again New York -- not so good in this department.

Gilmer: New York has fewer independent primary care physicians participating in the Medicaid program.

Because as generous as New York is in paying hospitals, its compensation rates for primary care physicians are near the lowest in the country. That means more New Yorkers head for a hospital instead of a doctor's office. Of course, Gilmer's study finds that there are lots of factors that influence how Medicaid is spent from state to state. He argues though that most states could make a dent in hospital costs by paying primary care physicians more.

Marsha Gold: That's a really encouraging finding.

Marsha Gold is a senior fellow at the health care research group Mathematica. She says the health care reform law will raise primary care payments in 2014.

Gold: That's the hope that if you can encourage more primary care, there might be long-term savings.

And that'll be particularly important in 2014, when Medicaid expands its eligibility requirements to allow another 17 million Americans to enroll.

In Philadelphia, I'm Gregory Warner for Marketplace.


Steve Chiotakis: If you are a not a New Yorker or a Californian, you can still find out where your state stacks up in Medicaid spending. Check out the Health Affairs website here.

About the author

Gregory Warner is a senior reporter covering the economics and business of healthcare for the entire Marketplace portfolio.

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