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USING APPROPRIATE PRICE INDICES FOR ANALYSES OF HEALTH CARE EXPENDITURES OR INCOME ACROSS MULTIPLE YEARS

This document provides guidelines to help ensure consistency and avoid confusion about the use of price indices with MEPS expenditure or income data. For additional information see Dunn, Grosse, and Zuvekas (2018).

Table 1 contains a summary of the recommended applications of different indices described in this document while Tables 2 and 3 provide the actual price indices for 1996 (first MEPS survey year) through the most recent year available.*

**Table 1: Crosswalk of Price Indices and MEPS Analyses**
Objective of Analysis	Recommended Index
Objective of Analysis	GDP¹ or PCE¹	CPI²	PHCE³ or PCE-Health¹ Total	PHCE³ Component	CPI-M⁴
Trends in Expenditures	X
Trends in Out of Pocket Expenditures Only		X			X
Pooling Total Expenditures			X
Pooling Out of Pocket Expenditures					X
Pooling Expenditures by Type of Service (e.g. prescription medications)				X
Trends with Income Measures		X

¹ See https://www.bea.gov/data/gdp/gross-domestic-product#gdp for more information on the Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE).

² See http://www.bls.gov/cpi for more information on the Consumer Price Index (CPI).

³ See https://www.cms.gov/files/document/definitions-sources-and-methods.pdf for more information on the Personal Health Care Expenditure (PHCE) component of the National Health Expenditure Accounts.

⁴ See https://data.bls.gov/cgi-bin/surveymost?cu for data on the Consumer Price indices for medical care (CPI–M).
Specific source pages on this website are:

Current Series U.S. Medical Care, 1982-84=100 - CUUR0000SAM
Medical care in the U.S. city average, all urban consumers, not seasonally adjusted

1. Comparing Total or Out-of-Pocket Expenditures for Different Years

1.1 Total Expenditures

Most often, comparisons are made of aggregate expenditures of one type or another. As a simple example, total expenditures for the U.S. civilian noninstitutionalized population were $964 billion in 2004 and $1499 billion in 2014 (both in nominal terms). Comparisons may also be done on a per capita basis, for certain subpopulations, or for certain types of services or drugs (for example, antidepressants). Regardless, the same considerations and options for adjusting expenditures to make cross-year comparisons apply.

Guideline 1: Make comparisons in nominal (or unadjusted) dollars. That is, leave expenditure estimates as they are, but document this clearly.
Guideline 2 (recommended): Use the Gross Domestic Product (GDP) price index¹ to put in constant dollars (also known as real or inflation adjusted dollars). For example, to express the 2004 total expenditure estimate in 2014 real (inflation adjusted) dollars, an analyst should multiply the 2004 estimate of $964 billion by a factor of (103.647/84.778) (obtained from Table 2). When compared to actual expenditures in 2014 of $1499 billion, this inflated expenditure estimate ($1179 billion) indicates that about $320 billion more was spent on health care in 2014 than 2004, after accounting for inflation. Alternatively, the narrower Personal Consumption Expenditures index may be used.

Explanation: In making these comparisons, what we are really asking is how has the amount of society’s resources devoted to health care changed over time. One option is to simply make expenditure comparisons in nominal terms but this does not account for price inflation—a dollar today is not worth a dollar tomorrow. A general price index should be used to put dollar figures into constant terms, because it provides an overall sense of what a dollar can buy today vs. yesterday, be it health care or something else.

While the Consumer Price Index (CPI) is the best known general index, the GDP price index is generally preferable for a number of reasons. Most notably, the composite CPI only covers about 60 percent of the economy, omitting rural consumers, government purchases, and investment goods. Given the high proportion of health care expenditures that comes from federal, state, and local governments, it is especially important to use a price index, such as the GDP index, that is broadly reflective of the entire U.S. economy. The GDP price index is the broadest index and the best choice when conducting analyses from the societal perspective. It is also used by the Centers for Medicare and Medicaid Services (CMS) in the National Health Expenditure Accounts (NHEA). Alternatively, the narrower Personal Consumption Expenditures index, which excludes investment goods but includes health care and other expenditures made by third parties on behalf of consumers, may be used.

1.2 Out-of-Pocket Expenditures

Guideline: Use the Consumer Price Index (CPI all-item all urban consumers). See Table 2.

Note: The CPI does not include government purchases and investment goods and is the most widely used price index for consumer spending.

**Table 2: Price Index Series (updated June 2020)**
Year	GDP¹	CPI²	PCE¹
1977*	33.445	60.6	31.986
1987*	57.041	113.6	55.964
1996	73.178	156.9	73.346
1997	74.446	160.5	74.623
1998	75.267	163.0	75.216
1999	76.346	166.6	76.338
2000	78.069	172.2	78.235
2001	79.822	177.1	79.738
2002	81.039	179.9	80.789
2003	82.567	184.0	82.358
2004	84.778	188.9	84.411
2005	87.407	195.3	86.812
2006	90.074	201.6	89.174
2007	92.498	207.342	91.438
2008	94.264	215.303	94.180
2009	94.999	214.537	94.094
2010	96.109	218.056	95.705
2011	98.112	224.939	98.131
2012	100	229.594	100
2013	101.773	232.957	101.346
2014	103.647	236.736	102.830
2015	104.688	237.017	103.045
2016	105.770	240.007	104.091
2017	107.795	245.120	105.929
2018	110.382	251.107	108.143
2019	112.348	255.657	109.658

¹ Bureau of Economic Analysis, National Income Product Accounts Tables, https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey
Specific source pages on this website are:

Section 1 Domestic Product and Income
Table 1.1.4 Price Indexes for Gross Domestic Products [Index numbers, 2012=100] Seasonally adjusted
Line 1 Gross Domestic Product (GDP) and Line 2 Personal Consumption Expenditures (PCE)

Note: Indices are revised periodically, check the Bureau of Economic Analysis website for most current data.
Data last accessed June 25, 2020.

² Bureau of Labor Statistics, Consumer Price Index-All Consumers, http://data.bls.gov/cgi-bin/surveymost?cu
Specific source pages on this website are:

Current Series U.S. All items, 1982-84=100 - CUUR0000SA0
All items in U.S. city average, all urban consumers, not seasonally adjusted

Note: Indices are revised periodically. Data last accessed June 25, 2020.

2. Pooling Two or More Years of MEPS Expenditures For Average Annual Estimates

Occasionally, sample size limitations make it necessary to pool two or more years of MEPS expenditure data to produce expenditure estimates of acceptable precision (for example, to analyze infrequently occurring health conditions or small demographic subpopulations).

Guideline 1 (total): If pooling total expenditures, use either the Personal Consumption Expenditure Health (Bureau of Economic Analysis) [Table 3, Column 1] or the Personal Health Care Index (CMS Office of the Actuary) [Table 3, column 2].
Guideline 2 (service type): If pooling only one type of health care expenditure, for example prescription drugs, then use the price index for that component of the Personal Health Care Index (see Table 3, Columns 3-11).
Guideline 3 (out of pocket): If pooling out of pocket expenditures, the CPI-M may be used (see Table 3, Column 12).

Explanation: Pooling expenditures requires a price index that is specific to health care services. Essentially, we are trying to mimic an annual expenditure estimate rather than compare inflation adjusted resources used for health care over time. But health care prices change from year to year, and faster than overall price inflation, so we need to account for these health care price changes when pooling.

The Personal Health Care Index and the Personal Consumption Expenditure Health Indexes are recommended over two alternatives, the CPI component specific to medical care (CPI-M) and the GDP price index for medical care. The Personal Health Care Index and the Personal Consumption Expenditure Health Indexes reflect total personal health care expenses, which is more appropriate than the CPI-M which only reflects out of pocket expenses. Both are also preferable to the GDP price index for medical care because the GDP index includes some expenses extraneous to MEPS such as those for medical research and public health programs. The CMS Office of the Actuary constructs the Personal Health Care Index based on components of the CPI-M and the Producer Price Index (PPI), and additional composite indices (see Table 3). The Personal Consumption Expenditure Health Index is constructed by BEA from many of the same CPI and PPI components used in the Personal Health Care Index. The Personal Health Care Index and the Personal Consumption Expenditure Health indexes have tracked very closely over the last two decades. The CPI-M is appropriate for pooling out of pocket expenses.

**Table 3: Personal Consumption Expenditure Health (PCE-Health)¹ and Personal Health Care (PHC; Overall and Component)² Price Indices by year - Part 1 of 2, Updated June 2020**
Industry/Commodity or Service	PCE - Health	PHC (Overall)	PHC - Hospital care	PHC - Physician/ clinical services	PHC - Other professional services	PHC - Dental services
1977*	16.811	20.4	18.1	28.4	21.7	14.6
1987*	38.676	44.4	41.2	58.1	46.6	30.9
1996	64.735	64.7	62.1	75.4	66.8	51.9
1997	65.994	65.8	62.6	76.2	69.1	54.3
1998	67.282	67.2	63.1	77.8	70.8	56.6
1999	68.917	68.9	64.2	79.4	72.3	59.2
2000	70.934	70.9	65.9	80.7	73.7	61.9
2001	73.428	73.5	68.2	83.1	76.2	64.4
2002	75.469	75.7	71.3	83.1	78.2	67.3
2003	78.155	78.2	74.4	84.5	80.6	70.1
2004	80.904	81.0	78.0	86.2	82.8	73.5
2005	83.413	83.5	81.0	87.9	85.1	77.6
2006	86.049	86.0	84.5	88.7	87.5	81.7
2007	88.866	88.8	87.4	92.2	89.9	85.9
2008	91.161	91.2	90.1	93.2	93.6	90.3
2009	93.669	93.7	92.8	95.3	95.5	93.0
2010	96.108	96.2	95.5	97.5	97.6	95.5
2011	98.058	98.2	97.6	98.9	99.0	97.7
2012	100	100	100	100	100	100
2013	101.228	101.5	102.2	100.1	101.7	103.4
2014	102.635	102.9	103.5	100.6	103.1	105.6
2015	103.748	103.5	104.5	99.5	103.9	108.3
2016	105.425	104.8	105.7	99.7	105.2	111.4
2017	107.225	106.1	107.5	100.2	107.7	113.2
2018	109.108	107.7	110.1	100.9	108.1	116.3

**Table 3: Personal Consumption Expenditure Health (PCE-Health)¹ and Personal Health Care (PHC; Overall and Component)² Price Indices by year - Part 2 of 2, Updated June 2020**
Industry/Commodity or Service	PHC - Other health, residential, and personal care	PHC - Home health care	PHC - Other non-durable medical products	PHC - Durable medical equipment	CPI - M³	CPI - PMED⁴
1977*	20.3	23.4	30.8	32.6	57.0	12.996
1987*	40.5	53.3	64.7	60.2	130.1	31.989
1996	60.7	76.4	88.8	83.2	228.2	55.186
1997	62.8	79.1	90.3	84.4	234.6	56.640
1998	65.0	81.4	91.5	86.0	242.1	58.753
1999	66.7	82.1	91.8	86.8	250.6	62.115
2000	69.6	85.1	92.3	88.4	260.8	64.842
2001	72.8	87.4	93.4	89.9	272.8	68.363
2002	74.9	89.3	93.4	90.0	285.6	71.907
2003	76.6	89.7	94.5	90.2	297.1	74.134
2004	79.3	91.8	94.4	91.6	310.1	76.588
2005	81.4	92.8	93.8	93.0	323.2	79.291
2006	83.3	93.3	95.7	95.1	336.2	82.677
2007	85.9	95.0	97.3	96.6	351.054	83.871
2008	89.4	96.6	98.4	97.4	364.065	85.945
2009	91.7	98.1	100.7	98.5	375.613	88.846
2010	94.9	99.2	100.6	98.4	388.436	92.656
2011	97.8	99.2	99.3	99.0	400.258	96.554
2012	100	100	100	100	414.924	100
2013	102.2	99.9	100	100.5	425.134	100.552
2014	104.7	100.8	99.2	101.1	435.292	104.134
2015	106.7	101.9	98.4	100.8	446.752	108.898
2016	109.7	103.5	97.3	101.4	463.675	114.168
2017	111.1	104.4	98.1	101.7	475.322	118.055
2018	112.8	107.0	97.6	102.6	484.707	119.961

¹ Personal Consumption Expenditure Health (PCE-Health) indices are available from the Bureau of Economic Analysis: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey
Specific source pages on this website are:

Section 2 Personal Income and Outlays
Table 2.5.4 Price Indexes for Personal Consumption Expenditures by Function [Index numbers, 2010=100]
Line 37 Health

Note: Indices are revised periodically, check the Bureau of Economic Analysis website for most current data. Data last accessed June 25, 2020.

² Personal Health Care (PHC) indices for all services, except prescription drugs, are available from the National Health Statistics Group, Office of the Actuary, the Centers for Medicare & Medicaid Services: https://www.cms.gov/files/zip/nhe-tables.zip
See table 23 of the National Health Expenditures Accounts. For definitions, sources, and methods go to https://www.cms.gov/files/document/definitions-sources-and-methods.pdf. Data last accessed June 25, 2020.

³ The Consumer Price indices for medical care (CPI–M) are available from the Bureau of Labor Statistics: https://data.bls.gov/cgi-bin/surveymost?cu.
Specific source pages on this website are:

Current Series U.S. Medical Care, 1982-84=100 - CUUR0000SAM
Medical care in the U.S. city average, all urban consumers, not seasonally adjusted

⁴ The price index for prescription drugs is the Bureau of Labor Statistics' Consumer Price Index (CPI) for prescription drugs: http://data.bls.gov/cgi-bin/dsrv?cu
Specific source pages on this website are:

Not Seasonally Adjusted
U.S. city average
Current
Search Text: prescription drugs

Data last accessed February 07, 2019.

* Indices for 1977 and 1987 are included in Tables 2 and 3 to facilitate comparisons between MEPS and its predecessors, the 1977 National Medical Care Expenditure Survey (NMCES) and 1987 National Medical Expenditure Survey (NMES), respectively. It is important to note that the 1977 NMCES and the 1987 NMES used charges as the fundamental expenditure concept, whereas the MEPS uses payments to measure expenditures. Zuvekas and Cohen (2002) describe a method using payment to charge ratios to adjust the 1987 NMES data to be more consistent with the 1996 MEPS and beyond.

Notes: All indices except CPI-M are scaled to 100 in 2012. The base period for CPI-M is 1982-84=100. Note that the Personal Health Care Index accounts for changes in nursing home prices and manufacturer's rebates for prescription drugs. The nursing home care component of the overall index is not included as a separate column in the Table 3 because MEPS does not cover residents of institutions. The CPI prescription drug index in the table does not account for rebates because MEPS measures transaction prices at the pharmacies.

3. Projecting Health Care Costs from Previous Years to More Current Years

Health care expenditure data from MEPS are sometimes used to project average costs for a specific disease or condition from one year to another year. For example, an estimate of average spending on diabetes care estimated with 2014 data might be projected forward to estimate spending in 2015. The following general guideline for adjusting health care expenditures mirrors the recommendation in section 2 above for pooling expenditures.

Guideline 1 (total): If projecting total expenditures, use either the Personal Consumption Expenditure Health (Bureau of Labor Statistics)[Table 3, Column1] or the Personal Health Care Index (CMS Office of the Actuary)[Table 3, Column 2].
Guideline 2 (service type): If projecting only one type of health care expenditures, for example prescription drugs, then use the price index for that component of the Personal Health Care Index (see Table 3, Columns 2-10).
Guideline 3 (out of pocket): If projecting out of pocket expenditures, the CPI-M may be used (see Table 3, Column 12).

4. Analyses Using Annual Income Data

Individual and family income data collected in MEPS are commonly used as covariates in behavioral analyses of health care spending and/or to construct measures of burden (e.g. ratio of out-of-pocket medical expenses to income). The following general guideline for adjusting income data mirrors the recommendation in section 1.2 above for adjusting out of pocket expenditures.

Guideline: Use the Consumer Price Index (CPI all-item all urban consumers). See Table 2.

5. References

Dunn, A., Grosse, S.D., & Zuvekas S.H. (2018). Adjusting Health Expenditures for Inflation: A Review of Measures for Health Services Research in the United States. Health Services Research, 53(1), 175-196.

Zuvekas, S.H., & Cohen, J.W. (2002). A Guide to Comparing Health Care Expenditures in the 1996 MEPS to the 1987 NMES. Inquiry: The Journal of Health Care Organization, Provision, and Financing, 39(1), 76-86.

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