Attributing medical spending to conditions: A comparison of methods

To understand the cost burden of medical care it is essential to partition medical spending into conditions. Two broad strategies have been used to measure disease-specific spending. The first attributes each medical claim to the condition that physicians list as its cause. The second decomposes total spending for a person over a year to their cumulative set of health conditions. Traditionally, this has been done through regression analysis. This paper has two contributions. First, we develop a new cost attribution method to attribute spending to conditions using a more flexible attribution approach, based on propensity score analysis. Second, we compare the propensity score approach to the claims-based approach and the regression approach in a common set of beneficiaries age 65 and older in the 2009 Medicare Current Beneficiary Survey. Our estimates show that the three methods have important differences in spending allocation and that the propensity score model likely offers the best theoretical and empirical combination.