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Alternative Price Indexes for Medical Care: Evidence from the MEPS Survey

Author

Listed:
  • Ana Aizcorbe
  • Ralph Bradley
  • Ryan Greenaway-McGrevy
  • Brad Herauf
  • Richard Kane
  • Eli Liebman
  • Sarah Pack
  • Lyubov Rozental

    (Bureau of Economic Analysis)

Abstract

Spending on medical care is a large and growing component of GDP. There are wellknown measurement problems that are estimated to overstate inflation and understate real growth for this sector by as much as 1-1/2 percentage points per year. Because of its size, this would translate into an overstatement of inflation for the overall economy of about ¼ percentage point with an equal understatement in real GDP growth. In this paper, we use data from the Medical Expenditure Panel Survey to obtain new, more comprehensive estimates for this bias and to explore a possible adjustment to existing official price indexes. The MEPS data show an upward bias to price growth in this sector of 1 percentage point, which translates into an overstatement of overall inflation of .2 percentage point and an understatement of GDP growth of the same amount. We also find that an adjustment recently used in Bradley et al provides a useful approximation to the indexes advocated by health economists.

Suggested Citation

  • 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.
    • Handle: RePEc:bea:wpaper:0069
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    References listed on IDEAS

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    1. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1998. "Are Medical Prices Declining? Evidence from Heart Attack Treatments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 991-1024.
    2. Ana Aizcorbe & Eli Liebman & Sarah Pack & David M. Cutler & Michael E. Chernew & Allison B. Rosen, 2010. "Measuring Health Care Costs of Individuals with Employer-Sponsored Health Insurance in the U.S.: A Comparison of Survey and Claims Data," BEA Working Papers 0066, Bureau of Economic Analysis.
    3. David M. Cutler & Ernst R. Berndt, 2001. "Medical Care Output and Productivity," NBER Books, National Bureau of Economic Research, Inc, number cutl01-1.
    4. Berndt, Ernst R. & Cutler, David M. & Frank, Richard G. & Griliches, Zvi & Newhouse, Joseph P. & Triplett, Jack E., 2000. "Medical care prices and output," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 3, pages 119-180, Elsevier.
    5. Aizcorbe, Ana & Nestoriak, Nicole, 2011. "Changing mix of medical care services: Stylized facts and implications for price indexes," Journal of Health Economics, Elsevier, vol. 30(3), pages 568-574, May.
    6. Irving Shapiro & Matthew D. Shapiro & David Wilcox, 2001. "Measuring the value of Cataract Surgery," NBER Chapters, in: Medical Care Output and Productivity, pages 411-438, National Bureau of Economic Research, Inc.
    7. A. J. Culyer & J. P. Newhouse (ed.), 2000. "Handbook of Health Economics," Handbook of Health Economics, Elsevier, edition 1, volume 1, number 1.
    8. Ernst R. Berndt & Susan Busch & Richard Frank, 2001. "Treatment Price Indexes for Acute Phase Major Depression," NBER Chapters, in: Medical Care Output and Productivity, pages 463-508, National Bureau of Economic Research, Inc.
    9. Abe Dunn & Eli Liebman & Sarah Pack & Adam Shapiro, 2010. "Medical Care Expenditure Indexes: A Comparison of Indexes using MarketScan and Pharmetrics Data," BEA Working Papers 0055, Bureau of Economic Analysis.
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    Citations

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    Cited by:

    1. 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.
    2. Bradley, Ralph, 2013. "Feasible methods to estimate disease based price indexes," Journal of Health Economics, Elsevier, vol. 32(3), pages 504-514.
    3. Tina Highfill & Elizabeth Bernstein, 2019. "Using disability adjusted life years to value the treatment of thirty chronic conditions in the U.S. from 1987 to 2010: a proof of concept," International Journal of Health Economics and Management, Springer, vol. 19(3), pages 449-466, December.
    4. Ana Aizcorbe & Tina Highfill, 2015. "Medical Care Expenditure Indexes for the US, 1980-2006," BEA Working Papers 0121, Bureau of Economic Analysis.
    5. Tina Highfill & Elizabeth Bernstein, 2014. "Using Disability Adjusted Life Years to Value the Treatment of Thirty Chronic Conditions in the U.S. from 1987-2010," BEA Working Papers 0113, Bureau of Economic Analysis.
    6. Amitabh Chandra & Jonathan Holmes & Jonathan Skinner, 2013. "Is This Time Different? The Slowdown in Healthcare Spending," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 261-323.
    7. 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.

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    JEL classification:

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

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