Why Indiana is outpacing the nation in health-care spending

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A dollar goes pretty far in Indiana.

How far? According to a study by Niche.com, a ranking and review website, Fort Wayne has the lowest cost of living in the nation, and Evansville is right behind at No. 2. Just a bit farther down the list is South Bend, in sixth place. Indianapolis is in 24th place.

That’s four Indiana cities in the top 25 for affordability.

But in one area—health care—Indiana is spending a bundle.

Spending on health care is now higher per capita in Indiana than the national average. And it’s been climbing for the past few years.

Here are some numbers. In 2014, the most recent year for which figures are available, health care spending in Indiana was $8,300 per person. The national average was lower, $8,045.

That's a turnaround from five years earlier, when the national average for spending on health care $6,982 per person, higher than Indiana's average of $6,892.

The numbers come from a study in the July issue of Health Affairs, a peer-reviewed journal. The lead author is David Lassman, a statistician in the Office of the Actuary at the Centers for Medicare and Medicaid Services.

In the Great Lakes region, Indiana spent more money per person on health care in 2014 than Illinois ($8,262) and Michigan ($8,055), but less than Wisconsin ($8,702) or Ohio ($8,712).

So why are Hoosiers spending so much money for health care?

The study doesn’t come out with any definitive reasons, since it looked at the big, national picture, and didn’t delve into Indiana’s situation.

But there are two possible reasons, according to the analysis.

First, the Affordable Care Act including a major expansion of health insurance coverage through Medicaid and private health insurance marketplaces.

The percentage of Hoosiers under 65 years old who were uninsured dropped from 14 percent in 2013 to 11 percent in 2014, and to 8 percent in 2015, according to the U.S Census Bureau.

That meant that more people were getting covered and were receiving more medical care, possibly for long-neglected health issues. All that extra care meant more spending on doctors’ visits, lab tests, x-rays and hospitalizations.

Medicaid spending in Indiana was $8,285 per person, higher than the national average of $6,815.

In addition, Indiana was one of 26 states that expanded its Medicaid coverage for low-income adults, through a program known as HIP 2.0.

Medicaid enrollment in Indiana surged about tenfold between in about two years–up from 37,000 in 2015 to about 427,000 this year. Still, the big expansion didn’t occur until 2015, and the Health Affairs study looked at data only through 2014.

A second possible reason: the recession and recovery. The economic downturn was sharp and devastating, notably to manufacturing-heavy states. Indiana is the most manufacturing-intensive state in the nation and lost nearly 60,000 high-paying manufacturing jobs between 2007 and 2013, according to the Indiana Business Research Center at the Indiana University Kelley School of Business.

But when the economy began to recover, many jobs came back—although not necessarily at the same companies, or even in the same industries. But the recovery meant people had more money to spend on health care and other needs.

By July 2014, Indiana had recovered more private sector jobs than it had lost in June 2007, considered the employment peak of the previous business cycle, according to IU business researchers.

The Health Affairs article said such factors could explain the growth in health care spending here.

“Regions that experienced the largest slowdowns in average personal income per capita by state also experienced some of the largest slowdowns in personal health care spending per capita during the recession, and vice versa as the economy began to recover,” the study said.

So more Hoosiers have health insurance, and health care spending per person is climbing here. Not really that surprising when you think about it.

But the study covered only a limited time frame, and there might be more ups and downs to report a few years down the road.

“Future vintages of state health expenditure data will permit further evaluation,” the study concluded.

Translation: Check back in a couple of years.

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