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Changing Mix of Medical Care Services: Stylized Facts and Implications for Price Indexes

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  • Ana Aizcorbe
  • Nicole Nestoriak

    (Bureau of Economic Analysis)

Abstract

The utilization of health care services has undergone several important shifts in recent years that have implications for the cost of medical care. We empirically document the presence of these shifts for a broad list of medical conditions and assess the implications for price indexes. Following the earlier literature, we compare the growth of two price measures: one that tracks expenditures for the services actually provided to treat conditions and another that holds the mix of those services fixed over time. Using retrospective claims data for a sample of commercially-insured patients, we find that, on average, expenditures to treat diseases rose 11% from 2003:1 to 2005:4 and would have risen even faster, 18%, had the mix of services remained fixed at the 2003:1 levels. This suggests that fixed-basket price indexes, as are used in the official statistics, could overstate true price growth significantly.

Suggested Citation

  • Ana Aizcorbe & Nicole Nestoriak, 2010. "Changing Mix of Medical Care Services: Stylized Facts and Implications for Price Indexes," BEA Working Papers 0064, Bureau of Economic Analysis.
  • Handle: RePEc:bea:wpaper:0064
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    1. GDP: One size no longer fits all
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-07-30 12:33:44

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    Cited by:

    1. Abe Dunn & Eli Liebman & Adam Hale Shapiro, 2016. "Decomposing Medical Care Expenditure Growth," NBER Chapters, in: Measuring and Modeling Health Care Costs, pages 81-111, National Bureau of Economic Research, Inc.
    2. Ana Aizcorbe & Tina Highfill, 2015. "Medical Care Expenditure Indexes for the US, 1980-2006," BEA Working Papers 0121, Bureau of Economic Analysis.
    3. Dunn, Abe, 2016. "Health insurance and the demand for medical care: Instrumental variable estimates using health insurer claims data," Journal of Health Economics, Elsevier, vol. 48(C), pages 74-88.
    4. Abe C. Dunn & Adam Shapiro & Eli Liebman, 2011. "Geographic Variation in Commercial Medical Care Expenditures: A Decomposition Between Price and Utilization," BEA Working Papers 0075, Bureau of Economic Analysis.
    5. Kate Ho & Ariel Pakes & Mark Shepard, 2016. "The Evolution of Health Insurer Costs in Massachusetts, 2010-12," NBER Working Papers 22835, National Bureau of Economic Research, Inc.
    6. Abe Dunn & Eli Liebman & Adam Hale Shapiro, 2014. "Developing a Framework for Decomposing Medical-Care Expenditure Growth: Exploring Issues of Representativeness," NBER Chapters, in: Measuring Economic Sustainability and Progress, pages 545-574, National Bureau of Economic Research, Inc.
    7. Weiwei Chen & Albert Okunade & Gregory G. Lubiani, 2014. "Quality–Quantity Decomposition Of Income Elasticity Of U.S. Hospital Care Expenditure Using State‐Level Panel Data," Health Economics, John Wiley & Sons, Ltd., vol. 23(11), pages 1340-1352, November.
    8. Abe Dunn, 2012. "Drug Innovations and Welfare Measures Computed from Market Demand: The Case of Anti-cholesterol Drugs," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 167-189, July.
    9. Abe Dunn & Adam Hale Shapiro, 2014. "Do Physicians Possess Market Power?," Journal of Law and Economics, University of Chicago Press, vol. 57(1), pages 159-193.
    10. Martha A. Starr & Forrest R. McCluer, 2014. "Prices and Quantities in Health Care Antitrust Damages," Working Papers 2014-03, American University, Department of Economics.
    11. Abe Dunn & Eli Liebman & Adam Hale Shapiro, 2015. "Implications of Utilization Shifts on Medical‐care Price Measurement," Health Economics, John Wiley & Sons, Ltd., vol. 24(5), pages 539-557, May.
    12. Erica L. Groshen & Brian C. Moyer & Ana M. Aizcorbe & Ralph Bradley & David M. Friedman, 2017. "How Government Statistics Adjust for Potential Biases from Quality Change and New Goods in an Age of Digital Technologies: A View from the Trenches," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 187-210, Spring.
    13. Abe Dunn & Eli Liebman & Lindsey Rittmueller & Adam Shapiro, 2014. "Defining Disease Episodes and the Effects on the Components of Expenditure Growth," BEA Working Papers 0108, Bureau of Economic Analysis.
    14. Bradley, Ralph, 2013. "Feasible methods to estimate disease based price indexes," Journal of Health Economics, Elsevier, vol. 32(3), pages 504-514.
    15. Dunn, Abe & Shapiro, Adam Hale & Liebman, Eli, 2013. "Geographic variation in commercial medical-care expenditures: A framework for decomposing price and utilization," Journal of Health Economics, Elsevier, vol. 32(6), pages 1153-1165.
    16. Dauda, Seidu & Dunn, Abe & Hall, Anne, 2022. "A systematic examination of quality-adjusted price index alternatives for medical care using claims data," Journal of Health Economics, Elsevier, vol. 85(C).
    17. Hall Anne E., 2016. "Estimating Regression-Based Medical Care Expenditure Indexes for Medicare Advantage Enrollees," Forum for Health Economics & Policy, De Gruyter, vol. 19(2), pages 261-297, December.
    18. Abe Dunn & Adam Hale Shapiro, 2011. "Physician Market Power and Medical-Care Expenditures," BEA Working Papers 0078, Bureau of Economic Analysis.
    19. Ana Aizcorbe & Ralph Bradley & Ryan Greenaway-McGrevy & Brad Herauf & Richard Kane & Eli Liebman & Sarah Pack & Lyubov Rozental, 2011. "Alternative Price Indexes for Medical Care: Evidence from the MEPS Survey," BEA Working Papers 0069, Bureau of Economic Analysis.
    20. Wulong Gu & Stéphane Morin, 2014. "Experimental Measures of Output and Productivity in the Canadian Hospital Sector, 2002 to 2010," NBER Chapters, in: Measuring Economic Sustainability and Progress, pages 575-594, National Bureau of Economic Research, Inc.
    21. Allison B. Rosen & Eli Liebman & Ana Aizcorbe & David M. Cutler, 2012. "Comparing Commercial Systems for Characterizing Episodes of Care," BEA Working Papers 0085, Bureau of Economic Analysis.
    22. Kate Ho & Ariel Pakes & Mark Shepard, 2018. "The Evolution of Health Insurer Costs in Massachusetts, 2010–2012," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(1), pages 117-137, August.
    23. Schleiniger, Reto, 2014. "Health care cost in Switzerland: Quantity- or price-driven?," Health Policy, Elsevier, vol. 117(1), pages 83-89.

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    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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