Attribution of Health Care Costs to Diseases: Does the Method Matter?

Allison B. Rosen, Ana Aizcorbe, Tina Highfill, Michael E. Chernew, Eli Liebman, Kaushik Ghosh, David M. Cutler

Chapter in NBER book Measuring and Modeling Health Care Costs (2018), Ana Aizcorbe, Colin Baker, Ernst Berndt, and David Cutler, editors (p. 173 - 210)
Conference held October 18-19, 2013
Published in February 2018 by University of Chicago Press
© 2018 by the National Bureau of Economic Research
in NBER Book Series Studies in Income and Wealth

Cost of illness (COI) studies focus on allocating health expenditures to a comprehensive set of diseases. A variety of techniques have been used to allocate spending to diseases. In this paper, we compare spending attributed to diseases using three approaches: one based on the principal diagnosis listed on each encounter’s claim, a second based on all diagnoses listed on the encounter, and a third based on decomposing a person’s total annual spending to their conditions. The study sample is large: 2.3 million commercially insured individuals under age 65. Results indicate significant differences in the allocations from the different approaches. The two claims-based encounter approaches allocate 78% of overall spending to diseases, while the person approach allocates 95% of spending to diseases. The large unallocated spending in the claims-based approach is due largely to lack of diagnosis codes for prescription medications. Spending was concentrated in a small number of conditions; the 10 most expensive diseases account for 40% of total spending with the person approach and about 18% of spending with the primary-diagnosis and all-diagnoses encounter approaches. Future research needs to pay careful attention to the choice of method in allocating spending to diseases, especially when research uses prescription medication claims data.

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