Predicting costs over time using Bayesian Markov chain Monte Carlo methods: an application to early inflammatory polyarthritis

This article focuses on the modelling and prediction of costs due to disease accrued over time, to inform the planning of future services and budgets. It is well documented that the modelling of cost data is often problematic due to the distribution of such data; for example, strongly right skewed with a significant percentage of zero‐cost observations. An additional problem associated with modelling costs over time is that cost observations measured on the same individual at different time points will usually be correlated. In this study we compare the performance of four different multilevel/hierarchical models (which allow for both the within‐subject and between‐subject variability) for analysing healthcare costs in a cohort of individuals with early inflammatory polyarthritis (IP) who were followed‐up annually over a 5‐year time period from 1990/1991. The hierarchical models fitted included linear regression models and two‐part models with log‐transformed costs, and two‐part model with gamma regression and a log link. The cohort was split into a learning sample, to fit the different models, and a test sample to assess the predictive ability of these models. To obtain predicted costs on the original cost scale (rather than the log‐cost scale) two different retransformation factors were applied. All analyses were carried out using Bayesian Markov chain Monte Carlo (MCMC) simulation methods. Copyright © 2006 John Wiley & Sons, Ltd.