Where the Money Goes: Medical Expenditures in a Large Corporation

Mark B. McClellan, David A. Wise

NBER Working Paper No. 5294
Issued in October 1995
NBER Program(s):Economics of Aging, Health Care

We use a new data file of insurance claims under employer- provided health plans to describe the pattern of expenditures in a large corporation: who spends? on what? for how long? The description is illustrative of detail that can be distilled for other firms. There are three noticeable features of spending: (1) The differences in the provisions of the two FIRM plans seem to have substantial effects on health care expenditures. Inpatient expenditures are a much larger fraction of the total under a first-dollar coverage plan available to hourly employees. (2) Substance abuse and other mental health disorders account for a surprisingly large fraction of health care costs. (3) The components of health care cost differ substantially across individuals, demographic groups, and plans, suggesting that further analysis of the 'micro' details of medical expenditures may help to assess the probable implications of alternative insurance reforms. (4) There is substantial persistence in individual health care expenditures from year to year. Illustrative calculations suggest that this persistence may lead to considerable inequality in individual costs under demand-side insurance reforms such as those coupled with IHA saving plans, and thus may place important limitations on plans that might otherwise be attractive. The exploratory analysis contained in this paper suggests that firm data can provide important insights into the black box that erupts expenditures under private insurance plans. And, hence these data may provide greater understanding of how plan reforms may affect expenditures.

download in pdf format
   (541 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5294

Published: Garber, Alan M. (eds.) Issues in Health and Aging in the United States and Japan. University of Chicago Press, 1995.

Users who downloaded this paper also downloaded* these:
Bordo and MacDonald w6115 Violations of the `Rules of the Game' and the Credibility of the Classical Gold Standard, 1880-1914
Campbell, Lettau, Malkiel, and Xu w7590 Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk
Kolstad and Kowalski w17933 Mandate-Based Health Reform and the Labor Market: Evidence from the Massachusetts Reform
Agenor and Aizenman w6080 Contagion and Volatility with Imperfect Credit Markets
Tornell and Velasco w5108 Fixed versus Flexible Exchange Rates: Which Provides More Fiscal Discipline?
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us