How Does Health Insurance Cover Expenses?

Health insurance helps manage medical expenses by spreading costs across a wide range of services rather than leaving individuals responsible for the full price of care. The chart below illustrates state-level healthcare spending patterns, showing how costs are distributed across major medical categories such as physician services, prescription drugs, hospital care, long-term care, and home health services. It also highlights the average inpatient hospital cost per day, which helps explain why hospitalization plays such a significant role in overall insurance pricing and cost-sharing.

These statewide spending estimates are based on reputable, publicly available datasets, primarily from the Kaiser Family Foundation’s State Health Expenditure Data. Understanding how healthcare dollars are typically spent in your state provides context for premiums, deductibles, network design, and why certain services account for a larger share of insurance coverage costs within Marketplace plans.