Topics: Miller College of Business, Research

February 26, 2020

A new study from Ball State University found that Indiana residents pay significantly more in annual healthcare expenditures than does the average American.

Do Indiana Residents Spend Too Much on Healthcare?” conducted by Ball State’s Center for Business and Economic Research (CBER), used a healthcare expenditure model of all 50 states, which predicts the level of per capita spending on healthcare given 20 different potential causal factors.

This model finds that Hoosier residents spend on average $746 per person more on healthcare than should be expected given these broad measures of healthcare access, behaviors, out­comes and demographics. The primary reason, according to the study, was Indiana’s monopolized healthcare market.

“We found that, in every measure, Hoosiers spent more on average than residents living in states who ranked worse than Indiana,” said CBER Director Michael Hicks. “Data painted an even more alarming picture of the relatively high cost of healthcare spending in Indiana. On average, Hoosiers pay $1,392 more per year than residents of those states who rank lower than Indiana on the American Health Rankings.”

For example, researchers found that six states have higher smoking rates than does Indiana, yet residents of only one pay more per person in healthcare expenditures. Also, there are 13 states with higher obesity rates than Indiana, yet residents in only two of those states pay higher healthcare costs than Hoosiers.

CBER’s latest study on healthcare costs examined per capita healthcare expenditures, hospital prices, and market concentration (monopolization) in Indiana, through the context of healthcare outcomes and behaviors.

Healthcare spending has been accelerating in recent years. From 1998 to the present and from 2010 to the present, growth of healthcare expenditures in Indiana have been the third and second highest in the nation, respectively, said Hicks, who conducted the study with Srikant Devaraj, a CBER research economist and research assistant professor.

“Annually, this is equivalent to more than $4.77 billion in excess costs to Indiana consumers,” said Hicks, the George and Frances Ball distinguished professor of economics. “Something other than our health, our demographics, and the availability of healthcare facilities is playing a role in our high medical expenses.

Hicks said that the research demonstrates that “areas where there is a clear monopolization of healthcare services by a single entity, the costs are much higher.”

“In our model, we find that for a patient moving from the least to the median concentrated market in Indiana would add $719 per night, or 17 percent, to the cost of a hospital stay. Moving from the median to the most concentrated market would add $1,648, or 39 percent, to each night of treatment in the hospital.”