Regional Price Parities for Health Care Services in the United States: Estimates from Commercial and Medicare Claims

This paper estimates price level inputs for health care services and incorporates them into the U.S. Bureau of Economic Analysis regional price parity (RPP) estimates. To do so, we use two large sources of health care claims data, covering both commercial payers and Medicare. We estimate state-level price inputs for six categories of medical services aligned with the personal consumption expenditures (PCE) classification. We find considerable cross-state variation in medical prices under both payers, with commercial price levels substantially more disperse than Medicare price levels and a cross-payer correlation of 0.64. We then integrate these medical price levels into the RPP framework by allocating health care PCE across commercial, Medicare, and Medicaid components using National Health Expenditure Accounts shares. Doing so alters all-items state RPPs and yields a standalone health care RPP.