A Disease-Based Price Index (DBPI) measures changes in the average price level to treat an episode of specific disease. A DBPI is calculated by estimating the average expenditure for all medical services used to treat a specific medical condition. It is a good indicator of medical prices in health care because an average customer is more interested in the total costs of treating a disease than the price for a single medical service such as one visit to doctor's office. See the complete description of our methods to construct disease based price indexes.
Currently published official medical price indexes track the price changes of a fixed market basket of medical goods and services while DBPIs encompass all services related to a specific medical condition over a period of time. DBPIs reflect not only changes in the price of the medical services, but also changes in the average utilization of the services for treating a disease. Traditional service based indexes have difficulty capturing technological improvements that allow diseases to be treated using fewer medical services or treatments moving to less intensive settings, e.g. inpatient to outpatient.
Taking a recommendation from National Research Council (2010), the U.S. Bureau of Economic Analysis (BEA) introduced a Health Care Satellite Account(HCSA), in which spending is reported by disease rather than by medical goods and services. BEA has also generated the Medical Care Expenditure (MCE) indexes for broad 18 categories of diseases in the HCSA. The HCSA comes with two versions: MEPS account and Blended account.
Since both BEA and BLS (with a 3-year lag) obtain the service quantity information from the Medical Expenditure Panel Survey (MEPS) and use the same index calculation formulas, differences in the indexes should be attributable to the price component. While BEA directly takes into the calculation the average expenditure to treat a disease with all medical services from MEPS, BLS instead uses current monthly CPI/PPI indexes for each medical service to publish timely indexes. In general, the average service prices per encounter grow faster than the service prices per procedure, resulting in a faster growth in BEA’s MEPS aggregate MCE index than BLS’s aggregate DBPI.
To address volatility issues due to relatively small sample sizes in MEPS data, BEA incorporates large claims data such as MarketScan Data, Medicare claims, and The Medicare Current Beneficiary Survey as supplements to create the so-called blended account. The MCE indexes for each disease category in the blended account are the same as those in the MEPS account; however, aggregate indexes across all diseases are different because of re-calculated expenditure weights with a variety of databases. Thanks to the increased sample sizes in the blended account, BEA recently released MCE indexes at a finer level - from 18 diseases categories to more than 260 specific medical conditions.
The files below contain the monthly history of the various disease based price indexes and standard deviations from January 1999 to the latest month in 2022. It contains not only the utilization adjusted disease based price indexes but also the indexes that are computed under traditional methods (the Lowe Indexes).
All diagnoses are classified into 17 disease categories by the ICD-10 manual (please see the technical note above for detail). We also select 115 medical conditions from the 17 disease categories to produce price indexes at a finer level (Please see Indexes for select specific conditions above). We produce and update our research DBPIs for each category on a monthly basis. The monthly indexes are available as both one month relative price change and cumulative versions from the base period- January 1999. The all-disease indexes are calculated by aggregating the individual disease series.
There are 3 options available for each disease index: fixed quantities (Lowe) or adjusted quantities (disease based), with or without comorbidity adjustment, and smoothed or unsmoothed. In the fixed quantities indexes, quantities are fixed at the base year level throughout the series. In contrast, quantities are updated annually in the adjusted quantities series. In the comorbidities unadjusted index, if a physician treats two diseases in the same visit, one visit will be allocated to the treatment bundle for each disease. In the comorbidities adjusted index, a fraction of the physician visit is assigned to each disease. The treatment bundle for each disease is updated annually. There are the unsmoothed indexes where all the yearly quantity updates are done in January of each year, which causes a “jump” in the January index, and the smoothed indexes where the annual quantity change is spread over the entire year (1/12 of the yearly quantity adjustment is applied to each month).
The indexes are calculated at the disease level and are then aggregated to form an all-disease index. Figure 1 below compares three different all disease price indexes. The first is the all disease index computed under the traditional fixed-basket method where the medical utilization for each disease is fixed at base period (1999) levels. We call this the Lowe Index and it only captures the changes in the prices of medical goods and services. The next two are disease-based price indexes where one makes an adjustment for comorbidities and the other does not. The comorbidity adjustment has a minimal impact on the Lowe index, so only the unadjusted version is presented. From 1999 to 2021, the disease-based price indexes on average grew less rapidly than the traditional Lowe index. However, there were periods when the reverse was true, particularly from 1999 to 2007. This was a period when health insurance coverage shifted from health maintenance organizations to more generous preferred provider policies. In recent years, the disease-based price indexes have grown more slowly than the Lowe index as average utilization for many diseases has decreased.
Figure 2 shows the effect of using different price indexes to calculate real medical expenditures in 2018. Real expenditure in 2018 is calculated by deflating nominal expenditures by the traditional Lowe Index without comorbidities, DBPI without comorbidities, and DBPI with comorbidities, respectively. Using a disease-based price index results in higher real medical care expenditures for 2018 than using the traditional Lowe price indexes. This also increases real GDP.
The file below contains the results from a decomposition of the growth in nominal expenditures by disease into the parts that come from inflation growth, population growth, and prevalence growth. The DBPIs and Lowe indexes used to deflate nominal expenditures here are indexes with and without comorbidities adjustments, and with smoothed quantities indexes.
Last Modified Date: March 25, 2022