7 States With the Lowest Health Care Costs

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.

7. Colorado
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.

6. Texas
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. 

5. Nevada
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.

4. Idaho
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.

3. Georgia
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.

2. Arizona
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.

1. Utah
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.

AET Chart

AET data by YCharts.

Aetna has had an especially good 2013. Even with the nice 30% run, the stock still looks attractively valued. 

Changes coming
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. 

Regardless of which state you live in, you'll be affected greatly by Obamacare. The Motley Fool's new free report, "Everything You Need to Know About Obamacare," lets you know how your health insurance, your taxes, and your portfolio will be affected. Click here to read more. 


Read/Post Comments (7) | Recommend This Article (2)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 10, 2013, at 5:12 PM, gcc22 wrote:

    These stats are a complete joke. Your per captia spending would be very low if you only cover 20% of your population like texas utah georgia. A more meaning stst would be per capita spending for the fully insured population.

  • Report this Comment On June 10, 2013, at 5:33 PM, Ronmc2 wrote:

    Other than conservative TX, shouldn't all the High Population states have lower Health Rates(as the Liberals have explained why ObamaCare will be sooo much cheaper than what we have now)

  • Report this Comment On June 10, 2013, at 5:59 PM, DoUrHomework wrote:

    Or you could actually look it up - those who are young adults (19-25) with health insurance coverage rates for these 7 states in the year 2011 - before Obamacare kicked in for coverage up to 26.

    AZ - 70.1%, CO - 73.9%, GA - 63.9%, NV - 61.7%

    TX - 59.3%, ID - 70.3%, UT - 77.0%

    US Avg - 71,8%

    Those are for the age range where you really have to ask yourself - do I really need health insurance?

    Now let's look a more relavent stat - older people use more health care - so maybe it has something to do with the median age of the citizenry of these states?

    State Median Age 2010

    Utah: 28

    Texas: 32.9

    Alaska: 33.4

    Georgia: 34

    Arizona: 34.1

    California: 34.2

    Idaho: 34.3

    Colorado: 34.5

    Mississippi: 34.9

    Nevada: 35.1

    Knock out Alaska due to heavier alcohol consumption, California due to costs of infrastructure and Missisissippi due to diet issues and what does that leave you?

  • Report this Comment On June 10, 2013, at 8:16 PM, jdw12 wrote:

    The article did not consider demographics. All other things being equal younger average age population means lower current year health cost.

  • Report this Comment On June 10, 2013, at 8:18 PM, jdw12 wrote:

    I know, at the end it said "maybe", they know better however!

  • Report this Comment On June 10, 2013, at 8:49 PM, idakiteman wrote:

    This is hooey. I live in Boise, Idaho. Needed a colonoscopy. Only 2 clinics give those in Boise. Price: $2100 to $4500+. Traveled to San Mateo, CA to visit family & got it for $1000. But SFO Bay Area has higher cost of living & far higher household income...but got this done less than half the cost of Boise. Sure, I have insurance...but if you way, "who cares?...insurance pays"...that behavior is what skyrockets our insurance costs. Shop around peeps...

  • Report this Comment On June 11, 2013, at 12:08 AM, airjackie wrote:

    Nothing beats Romneycare which many refuse to talk about as all citizens are covered. Notice how the Media and lawmakers ignored the fact the victims had great coverage and did not go broke from medical bills. But the victims of Oklahoma are asking for help with medical bills after the Tornado, No problem for New Jersey citizens as they have 24 million dollars to waste all the States should have that kind of extra money on hand.

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