For a Less Healthy State, Cut Business Taxes

In a recent column, I wrote about the importance of public health spending in reducing the death rate. 

What other public policy strategies also lead to a healthier state?

Chart shows positve healthy state rank relationship to health spending, negative to business tax climate. 

There are quite a few.  I compared several other state rankings with the most recent state health rankings published earlier this year. These included health care spending per capita, per enrollee Medicaid spending, Medicaid spending for people with disabilities, Medicaid spending on children, and state mental health agency spending.  I also looked at rankings in per capita income, household income, the percentage of people with private health insurance, and business tax climate.  

It turns out that a higher state ranking in eight of the nine areas is related to a higher state health ranking.  In only one area – business tax climate – did a higher ranking predict a lower state health ranking.

Like spending on public health, more generous health care spending – including safety net spending – is a strong indicator of a healthier state.  The healthiest state, Vermont, was 8^th overall in per capita health care spending.  Massachusetts, the second healthiest state, ranked second in Medicaid spending for people with disabilities.  Maine, which topped the state list in mental health spending, was the eighth healthiest state overall. 

The strongest indicators of a healthier state among the five areas of health spending were Medicaid expenditures on behalf of people with disabilities and the state’s ranking in per capita mental health spending. 

The next strongest was overall Medicaid spending.  Behind this were overall health care spending per capita and Medicaid per capita spending on children. Spending more on children generally means better prevention, and spending more on health care usually means better health care.  Both contribute to a healthier population. 

Some people might argue that there are economic factors at play here.  After all, wealthier people are healthier than poor people, so it stands to reason that higher per capita income would be a much better predictor of a state’s health ranking than entitlement spending would be. 

Higher per capita income is, in fact, related to a higher healthy state ranking.  Eighteen of the states in the top 25 in the healthy state rankings are also in the top 25 in per capita income.  However, a state’s per capita income ranking is no better a predictor of the state’s health ranking than is its overall spending on Medicaid.

Put another way, a state’s spending on mental health and disabilities services is a better indicator of a state’s health ranking than is its per capita income.

Another economic factor – the state’s ranking in the number of people who are privately insured in the state – is strongly related to the state’s health ranking.  The more people on private insurance, the healthier it is for a state. 

So it turns out that there are many policy decisions state legislators can make to improve the health of the people of their states.  They can spend more on Medicaid, put more state resources into mental health services, get more people on private insurance, increase minimum and living wage standards, and make sure that health care providers are plentiful and paid decently for their services.

Most states are doing exactly the opposite today. 

Some are even taking it one step farther.  They are cutting business taxes in an effort to improve their business tax climate.

However, the better the business tax climate ranking, the lower that state’s health ranking seems to become.

Nevada, for example, has the 4^th best business tax climate, but it was the 47^th healthiest state.  Florida has the 5^th best business tax climate, but it was the 37^th healthiest state.  The least healthy state, Mississippi, had the 21^st best business tax climate. 

Chart shows poor relationship of business tax climate to per capita income and private insurance rankings.

There is a reason why so-called “business tax expenditures” don’t translate into a healthier state.  It is that these don’t appear to improve a state’s economy. 

A better business tax climate ranking is related to lower, not higher, per capita income, and has no effect at all on the state’s ranking in the number of people who are privately insured.

A good business tax climate does not have to lead to a poor state health ranking.  New Hampshire, for example, is the third healthiest state and has the seventh healthiest business tax climate.  But it also prioritizes health and worker benefits.  It is in the top tier of state per capita mental health and Medicaid spending, its per capita income is high, and its employers are tops in providing private health insurance to workers.

We can have a healthier population working within the constraints of bad economic times.  We just have to stop knee-jerking about entitlements and taxes, focus our attention on what works, and invest in our people again.

Column note:  The two charts accompanying this blog may be difficult to interpret because of the number of state data points on them.  I added the liner trend lines to simplify them.  Trend lines that move in the same direction as the line to which they are being compared (the healthy state ranking in the first chart and the business tax climate in the second) have a positive relationship to it; flat lines have no relationship and those moving in the opposite direction have a negative one.  For further reference, I have created a new page with a table (see the “State Rankings” tab) of all the state rankings I used.  The sources for the rankings and the charts are on that page.

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