Americans pay a lot for health care. The latest information from the Centers for Medicare and Medicaid Services, or CMS, shows that around $6,815 per person is spent on various forms of health care, including hospital stays, physician care, skilled nursing, prescription drugs, and a host of other areas. Some pay considerably less than others, though. Here are the 7 states with the lowest annual per-capita health care costs in the U.S.
High altitudes don't appear to correspond with high medical costs. Coloradans spend $5,994 per capita on health care -- 12% less than the amount paid by Americans as a whole.
Texans like to say that everything's bigger in Texas. One thing that's not bigger, though, is health care spending. The state's per-capita figure of $5,924 is 13% below the amount paid nationwide.
More money might go to casinos in Nevada than any other state, but considerably less goes to health care on a per-capita basis. Nevadans spend $5,735 per person on medical expenses. That's around 16% below the U.S. amount.
What do most people think of when Idaho is mentioned? Probably mountains, potatoes, and gems. Add low health care costs to the list of the state's notable aspects. Idaho ranks as the fourth-lowest state in the nation when it comes to medical spending, with $5,658 per person -- 17% lower than that of the entire U.S.
An old sweet song keeps Georgia on our minds -- and maybe so should low medical costs. The southern state claims the No. 3 spot on our list with per-capita medical spending of $5,467. That amounts to 20% less than the figure for the entire U.S.
Arizona's Grand Canyon rates as one of the most spectacular sites in the country. Citizens of the state don't have a big hole in their wallets when it comes to health care spending, though. Arizona's $5,434 per-capita is 20% lower than the nationwide amount.
Utah boasts the lowest medical spending per person in the U.S. The state's per-capita figure of $5,031 is an impressive 26% less than that of the nation as a whole. Utah residents spend 26% less than the nation overall on hospital care, 28% less on physician and clinical services, and 58% less on skilled nursing. These three areas combine to make up three-quarters of total health care spending in the state and nationwide.
Same kind of different
Utah, Arizona, Idaho, Nevada, and Colorado form a geographical cluster, but Georgia and Texas stand out as exceptions. In my recent analysis of the states with the highest health care costs, I noted that five of those states also ranked among the top 10 states with the highest cost of living. The opposite doesn't hold true with our low-cost states, though. Only two of the states are in the top 10 states for lowest cost of living.
Some might suspect that the states with the lowest per-capita costs might also have the worst health care results. You get what you pay for, right? Not so fast.
UnitedHealth Group's (NYSE: UNH ) United Health Foundation ranks each state annually on 24 measures related to health care. One of the low-cost states on our list -- Utah -- made the top 10 on this health ranking, with Colorado not far behind in 11th place. Four of the seven on our list were in the upper half of states on the 2012 health ranking.
Winning with the winners
There probably isn't a clear-cut way for investors to profit from this information. One possible option, though, is to buy stocks of health insurers that have a significant presence in these states that spend less on health care. The premise here is that the insurers could generate more profits if they don't have to pay out as much to health care providers on a per-capita basis.
Aetna (NYSE: AET ) bought Coventry Health Care in May. Coventry's Altius Health Plans holds a market share over 9% in Utah. UnitedHealth and Humana (NYSE: HUM ) ranked among the top five health insurers in Utah in direct premiums received in 2011. Both companies claimed more than 5% market share.
All three companies also maintain a sizable presence in the No. 2 state on our list, Arizona. UnitedHealth, in particular, stands out in the Grand Canyon State with 2011 premiums from the state of more than $1.1 billion.
Actually, these big insurers operate in all of the seven states that have the lowest health care costs. However, they also operate in all of the states with the highest costs. This doesn't mean that the stocks aren't good picks, though. They have all done very well so far this year.
Aetna has had an especially good 2013. Even with the nice 30% run, the stock still looks attractively valued.
While these states currently have lower health care costs than the rest of the nation, many people are worried about what will happen with medical costs in the years to come. New technologies, new payment methods -- and, of course, a new health care model with Obamacare -- will change how much all Americans pay for health care.