Calculating Disease-Based Medical Care Expenditure Indexes for Medicare Beneficiaries: A Comparison of Method and Data Choices

Anne E. Hall, Tina Highfill

NBER Working Paper No. 19720
Issued in December 2013
NBER Program(s):   AG   HC   PR

Disease-based medical care expenditure indexes are currently of interest to measurement economists. In this paper, using two data sources and two different methods for calculating disease-based expenditure indexes for the Medicare population, we establish some results that will help guide policymakers in choosing indexes for this population. First, we find that the two methods we examine (primary diagnosis and a regression-based method) produce the same results for the aggregate index and have a moderate level of agreement in which diseases contribute the most to growth in per capita health-care spending. Since the primary diagnosis method is preferable because of its transparency, this result implies that we may use the regression-based method when the data is not suitable for the primary diagnosis method without a great loss of accuracy. Second, we find that the two data sources, the Medicare Current Beneficiary Survey and the Medical Expenditure Panel Survey, produce very similar results in the aggregate but there is some evidence that they treat chronic illnesses differently. As the MCBS has a larger sample and more comprehensive coverage of Medicare beneficiaries than the MEPS, it seems that a regression-based expenditure index based on the MCBS is overall preferable for fee-for-service Medicare beneficiaries.

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Document Object Identifier (DOI): 10.3386/w19720

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