Adjusting Health Expenditures for Inflation: A Review of Measures for Health Services Research in the United States (PDF)

Objective. To provide guidance on selecting the most appropriate price index for adjusting health expenditures or costs for inflation.

Data Sources. Major price index series produced by federal statistical agencies.

Study Design. We compare the key characteristics of each index and develop suggestions on specific indexes to use in many common situations and general guidance in others.

Data Collection/Extraction Methods. Price series and methodological documentation were downloaded from federal websites and supplemented with literature scans.

Principal findings. The gross domestic product implicit price deflator or the overall Personal Consumption Expenditures (PCE) index are preferable to the Consumer Price Index (CPI-U) to adjust for general inflation, in most cases. The Personal Health Care (PHC) index or the PCE health-by-function index are generally preferred to adjust total medical expenditures for inflation. The CPI medical care index is preferred for the adjustment of consumer out-of-pocket expenditures for inflation. A new, experimental disease-specific Medical Care Expenditure Index is now available to adjust payments for disease treatment episodes.

Conclusions. There is no single gold standard for adjusting health expenditures for inflation. Our discussion of best practices can help researchers select the index best suited to their study.

Key words: healthcare costs, expenditures, healthcare prices, inflation, cost of illness, costeffectiveness.

Abe C. Dunn , Scott D. Grosse , and Samuel H. Zuvekas

JEL Code(s) I10 Published