Health and Hospital Expenditures

State and Local Backgrounders Homepage

Spending on health and hospitals includes spending on community and public health programs, government-owned hospitals, and government payments to privately owned hospitals.1

How much do state and local governments spend on health and hospitals?

In 2015, state and local governments spent $265 billion, or 9 percent of direct general spending, on health and hospitals.2 Health and hospitals combined were the fourth-largest source of direct general spending at the state and local level in 2015, and they have been since 1999. Between 1977 and 1999, health and hospitals ranged from the third- to fifth- largest expenditure category.

In 2015, 65 percent of health and hospitals spending went to hospital services; 35 percent went to other health programs. Hospital services include the operation of university medical schools, state-owned hospitals for people with mental illness or disabilities, public children’s hospitals, and payments to private hospitals for public services. Payments to providers under public welfare programs, such as Medicaid, are counted separately under public welfare expenditures. Health-related expenses include mental health and substance abuse programs, water and air quality regulation, and health inspections. The share of state and local health and hospital spending directed toward health services has been growing over time: 24 percent went to health services in 1977 compared with over 33 percent in 2015.

Ninety-six percent of 2015 health and hospital expenditures were for operational costs, such as public health administration, community health programs, public hospital operations, and regulatory services. The remaining 4 percent went to capital outlays, such as hospital construction. That percentage allocation holds for both health and hospital services individually.

How does state spending differ from local spending?

State and local governments spend roughly the same proportion of their budgets on health and hospitals. In 2015, 10 percent of local direct general spending went to health and hospitals versus 9 percent of state direct general spending.

Health and hospital services encompass many activities, including the construction and operation of state university hospitals, county health department inspections, and municipal public health programs (even if these programs are funded in part by state or federal grants). Overall, 88 percent of total health and hospital spending ($225 billion) was funded directly by state and local governments. The remaining 12 percent ($31 billion) was funded by federal grants to state and local governments.

However, states vary considerably in their distribution of state and local health and hospital spending. In Indiana, for example, only 12 percent of state and local health and hospital spending occurred at the state level in 2015. In Hawaii, by contrast, the state was responsible for 98 percent of state and local health and hospital spending.

How have health and hospital expenditures changed over time?

In 1977, state and local governments spent $90 billion on health and hospitals (in 2015 inflation-adjusted dollars). In 2015, they spent $265 billion, or almost three times that amount. In 1977, 8 percent of state and local spending went to health and hospitals compared with 9 percent in 2015.

How and why does spending differ across states?

Across the US, state and local governments spent $825 per capita on health and hospitals in 2015. Wyoming spent the most per capita on health and hospitals (at $2,461 per capita), followed by South Carolina ($1,489), Mississippi ($1,343), North Carolina ($1,297), and Alabama ($1,257).  New Hampshire spent the least per capita ($145), followed by Rhode Island ($243), North Dakota ($335), and South Dakota ($355).

Health and hospital spending may vary by state for many reasons, including higher utilization of health services or hospital readmission rates among some populations; higher regional health care costs; the number of state and locally-owned hospital beds; or other factors that may require additional investment in public health services to address, such as pollution or mental health and substance abuse problems .

States, for example, have different levels of spending on state psychiatric hospitals, which are counted under state and local hospital spending. In 2015 , the District of Columbia, New York, and New Jersey spent the most per capita on state psychiatric hospital inpatient care; Arizona, Oklahoma, and New Mexico spent the least. However, psychiatric inpatient care is just one component of state and local health and hospital spending.  

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Further Reading

State Variation in Hospital Costs of Gun Violence
Embry M. Howell and Anuj Gangopadhyaya (2017)

Health of the States: How U.S. States Compare in Health Status and the Factors that Shape Health
Steven H. Woolf, Laudan Y. Aron, Derek Chapman, Lisa Dubay, Emily Zimmerman, Lauren C. Snellings, Lindsey Hall, Amber D. Haley, Nikhil Holla, Christopher Lowenstein, and Timothy A. Waidmann (2016)

A new tool to get under the hood of state and local budget choices
Tracy Gordon, TaxVox (2017)

Assessing Fiscal Capacities of States: A Representative Revenue System–Representative Expenditure System Approach, Fiscal Year 2012
Tracy Gordon, Richard Auxier, and John Iselin (2016)

Prepping for the 2018 Legislative Session
Richard Auxier and Erin Huffer (2017)

Prepping for the New Session: End-of-Summer Reading for State Budget Analysts
Norton Francis, Sarah Gault, and Yifan Zhang (2016)

Prepping for the New Session: End-of-Summer Reading for State Budget Analysts
Norton Francis, Tracy Gordon, and Megan Randall (2015)

Governing with Tight Budgets: Long-Term Trends in State Finances
Norton Francis and Frank Sammartino (2015)

State Budgets in the Trump Era
Kim Rueben and Richard Auxier (2017)

1 Data are from census expenditure categories E32, E36, F32, F36, G32, G36, K32, and K36.

2 Direct general spending refers to all direct spending (or spending excluding transfers to other governments) except spending specially enumerated as utility, liquor store, employee-retirement, or insurance trust. Unless otherwise noted, all data are from the US Bureau of the Census, Survey of State and Local Government Finance, 1977–2015, accessed via the Urban-Brookings Tax Policy Center Data Query System, October 18, 2017, The census recognizes five types of local government in addition to state government: counties, municipalities, townships, special districts (e.g., a water and sewer authority), and school districts. All dates in sections about expenditures reference the fiscal year unless explicitly stated otherwise.