Accounting for Health and Health Care Approaches to Measuring the Sources and Costs of Their Improvement (2010) / Chapter Skim
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4 Measuring Prices and Quantities of Medical Care: Improving Medical Care Price Indexes
4 Measuring Prices and Quantities of Medical Care: Improving Medical Care Price Indexes
Pages 95-118
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From page 95... ...
4.1. ALTERNATIVE ESTIMATIONS OF QUANTITY GROWTH IN MEDICAL CARE SERVICES: THE ROLE OF PRICE AND QUANTITY INDEXES Two methodologies exist for aggregating quantity changes of medical treat ments.
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The alternative method is to aggregate the quantities directly. To do this, a quantity index of treatments is computed (e.g., for heart attacks)
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From page 97... ...
In practice, minimizing price change variance is one principle for structuring samples for price indexes. The statistical methods can therefore be regarded as implementing Hicksian aggregation in the price indexes.
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From page 98... ...
4.1.2. Direct Quantity Indexes Instead of indirectly computing the right-hand side of equation 4.1 using price indexes (justified by the assumption that P = MC)
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From page 99... ...
An index number is a way of controlling for heterogeneity -- differences in treatments, in severity, or in demographics of the patient, as well as other factors. It is hard to conceive of any medical care output that is sufficiently homogeneous that a straight count of the number of treatments, or a simple average of treatment prices (in the price measurement literature known as a unit value index)
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From page 100... ...
The PPI indexes are used to estimate output for the existing BEA industry accounts for NAICS 62 and its subsectors. As noted in the previous section, when the receipts of a NAICS industry or sector are deflated by a medical care price index, the result is a quantity index of medical services produced by the industry or sector (equation 4.1)
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From page 101... ...
These indexes map onto the mental health chapter of the ICD. The improved methodology in the post-1992 PPI hospital index caused it to grow less rapidly than an index using the older method.
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From page 102... ...
4.2.2. Other PPI Medical Care Components The PPI hospital indexes, including an index for specialty hospitals, are estimated and published using a disease classification.
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From page 103... ...
statistical system will have gone a long way toward providing expenditures and price indexes for medical care that are harmonized around a cost-of-disease framework. Recommendation 4.3: The Census Bureau should give high priority to providing annual data for hospitals and other medical care industries, grouped by a cost-of-disease system that matches the one used in the 2007 Economic Census and in the Producer Price Index.
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From page 104... ...
was adapted from the "model price" method developed by Statistics Canada for construction price indexes.8 BLS has also applied the model price method to various services industries such as engineering, for which finding the exact item to price in subsequent periods is impossible. Note that BLS could have estimated a unit value index for, say, heart attacks, but it did not.
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From page 105... ...
On the quantity side, the unit value index implies that a simple count of the number of, for example, heart attack treatments suffices. Bearing in mind the definition of the unit value, (∑PQ / n)
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From page 106... ...
4.3.2. Quality Change Adjustments for Improved Treatments It is generally accepted, both in the price index literature and in medical economics,11 that price indexes need to be adjusted to reflect improved medical treatments or (as it is usually called in the price index literature)
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13A detailed discussion of BEA and BLS plans for improving medical care price indexes and for dealing with quality change can be found in National Research Council (2009)
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From page 108... ...
should evaluate the implications of the apparently low rate of encounters with new treatments in its hospital indexes. Examining data from reimbursement protocols could provide a benchmark for how rapidly treatments are changing in medical practices.
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From page 109... ...
Under current PPI procedures for pricing cataract treatments, BLS might sample surgeries that take place in a hospital; the resulting price index for cataract surgery would feed into the published hospital PPI for ICD Chapter 6, Diseases of the Nervous System and Sense Organs (code 366 is cataracts)
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From page 110... ...
When medical treatments cross industry lines (the prototypical cataract surgery problem) the problem posed for medical care price indexes is identical, con ceptually, to the "discount store problem" much discussed in the CPI literature: pricing products within a store, as BLS does, misses price changes that a con sumer experiences from shopping at different outlets (Reinsdorf, 1993; Reinsdorf and Moulton, 1997; Feenstra and Shapiro, 2003)
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From page 111... ...
The researcher might gather data from individuals or from claims, computing the total cost of a treatment in two periods. Alternatively, an adjustment might be applied to PPI price quotes across industries or in aggregating PPI indexes across industries.
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From page 112... ...
If the nonsuture cataract surgery was performed in a physician's office, that would not be, as BLS current index sampling procedures cannot accommodate changed treatments that cross providers. Murphy stated that BLS would in principle want to be able to measure price change associated with these kinds of treatment changes.
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From page 113... ...
Clearly, the PPI samples are not nearly so comprehensive as those drawn from claims data.20 Offsetting their undeniable advantages, claims data usually require computing unit values as price indexes. For some databases, there is no basis for matching observations in adjacent periods; however, some longitudinal claims databases do exist, and more may be created.
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From page 114... ...
But few international economists would favor the unit value index over the fixed-specification price index, even if they point to measurement problems with the latter (a recent paper on measurement problems in BLS import and export price indexes is Feenstra, Diewert, and U.S. Office of Prices and Living Conditions, 2001)
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From page 115... ...
Using the number of prescriptions in the denominator essentially imputes all the expenditure difference across countries to a price change, whereas much of it is in fact attributable to new drugs or new formulations and to generics. Even with very large samples, international comparisons of prices using unit value indexes will give misleading results.
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From page 116... ...
They compute unit value indexes that treat shifts among industries (e.g., in-hospital treatment compared with doctor's office visits) as price change and compare them with unit value indexes in which the distribution of patients across industries is held fixed.
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From page 117... ...
Success in building a medical care account will give medical economists what economists in other specialties have -- a price/output data set that they can improve.
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