Opinion: Is it such a bad thing that California spends less on healthcare?
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The Times on Thursday found much to worry about in a new federal study about healthcare spending. Not that Californians were spending too much, but that they were spending too little. It makes me wonder whether the news is actually better than it seems. Maybe we spend less than much of the rest of the country because we don’t need as much care.
The study, which looked at spending by public programs, private insurers and individuals, estimated that California had the 10th-lowest amount of spending per person in the U.S. That could be a bad thing, but it could also be a good thing. Here’s how the study put it:
We found that states with higher per capita personal health care spending generally had relatively higher per capita income together with higher-than-average shares of the elderly. States with lower per capita personal health care spending, on the other hand, have relatively younger populations with less access to health insurance. If these trends persist, these states would be most likely to have the greatest potential number of people eligible for the Medicaid expansion or exchange coverage.
Umm, thanks for that. The Times’ story offers a clearer picture, quoting two experts who say the numbers are an ominous indicator of trouble ahead. For example, it offers these words from analyst Larry Levitt at the Kaiser Family Foundation:
The state is essentially under-investing in healthcare and ending up with an unhealthier population as a result ... people aren’t healthy, they are not able to work or to be as productive as they otherwise would be.
But the story, and the CMS report, suggest a more benign explanation. Maybe, just maybe, the state’s residents don’t need as much healthcare, and when they do need it, they’ve found ways to pay less for it.
The healthcare spending numbers are very strongly correlated with age, and California’s median age is the sixth lowest in the country. The state has the 11th-lowest obesity rate (although the correlation between obesity and per capital healthcare spending isn’t all that strong). It has the second-lowest percentage of smokers.
Yes, an unusually high percentage of California’s residents lack health insurance. Only five states have a higher share. That’s attributable at least in part to the number of undocumented immigrants here. But it’s a leap to conclude that these are uniformly sickly people who postpone care until they’re dragged into the ER. They’re not. So even if every legal resident in this group is added to the Medi-Cal rolls in 2014, when the Affordable Care Act extends Medicaid coverage to more low-income Americans, that doesn’t mean they’ll consume a disproportionate amount of healthcare services. They may demand less care because, collectively, they’re younger and/or healthier.
Another factor holding down spending in California is the broad reliance on managed care. There are more HMOs here than in any other state, and more enrollees in managed-care services by far. Reliance on HMOs has also helped the state hold down its spending on Medi-Cal, although another major factor has been the extremely low fees the state pays doctors and hospitals.
I’m speculating about a lot of this stuff, and despite some encouraging data points, I can’t say for sure that the state’s comparatively low spending per capita on healthcare is good news. At the same time, however, I don’t think it’s fair to conclude that it’s a portent of doom. After all, holding down healthcare costs is one of the most important challenges this country faces. That means doing more to stay healthy and reduce the demand for care. It would be a great thing for Californians if those were, in fact, the reasons why we’re spending less on healthcare than our average countrymen.
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