ISER report says Alaska health care spending is highest in nation

Alaskans spend more on health care than residents of any other U.S. state, a recent report by the UAA Institute of Social and Economic Research found. Health care spending increased nationwide over the past 25 years; in Alaska, however, the spending increased more rapidly.

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Photo credit: Jian Bautista

In 1991, the state spent $1.5 billion on health care. Twenty-three years later, the costs have increased more than five times over: in 2014, the total health care spending amounted to $8.2 billion.

Mouhcine Guettabi, UAA professor for economics, compiled the data with ISER research professionals Jessica Passini and Rosyland Frazier. The report is the first publicly available summary of health care trends in Alaska.

Guettabi thinks that the report serves as “an important first step” in opening a conversation about the trends.

“Health care costs and health care spending are growing at an incredibly fast pace in the state, and we have to grapple with them in one way or another going forward,” Guettabi said.

The average American spent about $8,000 on health care in 2014. The average Alaskan, however, had to spend $11,000. This marks a significant increase from older data; in 1991, both Alaskans and average Americans were spending between $2,600 and $2,700 on average.

The health care costs in the U.S. are already high compared to other countries. With Alaska being above national average, the state might have one of the highest health care costs in the world, Guettabi explained.

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The increases in health care spending have consequences for the state’s economy. The impact on business in Alaska is negative, according to Guettabi. This traces back to the role of benefits in employee compensation.

“Benefits represent a big portion of overall compensation. As a result of growing health care costs… the burden that is imposed on employers is higher,” Guettabi said. “This makes a business more reluctant to hire employees [and] it makes people more reluctant to start businesses.”

For individuals, the increased health care costs might mean stagnant wages.

“A lot of what would have been wage increases are going towards premiums and towards benefits, so governments, individuals and businesses are all affected by this health care crisis,” Guettabi said.

A consequence of this is medical tourism: Alaskans and Alaskan businesses have started looking for cheaper medical treatments in the Lower 48.

The report itself does not pinpoint the causes for the rapid growth in spending, which remain speculative.

Arielle Himmelbloom, UAA health sciences major, thinks that the number of health care professionals in Alaska might be a decisive factor in the cost development.

“In this context, I believe it would be beneficial to have more health care professionals,” Himmelbloom said.

Providing easier care access to rural areas could lower the average spending, Himmelbloom explained.

Guettabi, Passini and Frazier worked on the compilation of the data for two years. The comprehensive report includes information on Alaska health care spending, the state’s health and social services budget, as well as the growth of health spending in the nation.

The ISER report relies on data of the national Centers for Medicare and Medicaid Services, which collected health care spending across states in the U.S.

David Lassman, lead author of this national report, pointed out that the health care spending gap increased less rapidly in the more recent past.

“Recent economic and health sector factors have had clear impacts by state… However, during the 2009 to 2014 period, the variation in spending between the lowest and highest states was virtually unchanged,” Lassman said in a press release.

The next step is to determine the specific reasons for the growth in health care spending.

“We are starting to do some empirical work trying to un-peel the onion, if you will,” Guettabi said. “I think the next step is to ask specific questions about which policies potentially have led to a higher healthcare cost and what changes can be implemented in order to address it. “

The full ISER report can be found under