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Bureau of Economic Analysis Work on Health Care Spending Accounts

By August 19, 2015Commentary

The Bureau of Economic Analysis is responsible for analyzing and reporting on the economy, a large part of which is obviously the health sector.  In a new research release, the Bureau presents the initial version of its work to create a Health Care Satellite Account to track health spending more effectively.  (BEA Paper)   The national income and product accounts had treated health spending as based on categories of goods and services.  The new revision treats it as being made for diseases.  In addition, the price indices for health spending are now oriented toward price changes for the treatment of a disease, as opposed to the producer price indices used to measure prices for a health service or product.  The old method likely failed to capture changes in methods or intensity in treatment of a disease over time.  The raw data for the new accounts will be both the Medical Expenditure Panel Survey and a variety of other sources, such as large commercial insurer and the Medicare claims databases, which should substantially increase the accuracy of the accounts.  The old way used MEPS data only and was believed to understate health spending by as much as 10%.

The new methods would show faster health price growth from 2000 to 2010, around 4% to 4.4% annually, compared to the traditional measurement of price rises for individual services, which showed 3.1% annual increases.  This implies that real health spending growth was around 2% to 2.4% per year over this period, lower than previously believed.  In any event, it still appears that the largest driver, accounting for 73%, of total health spending is an increase in the cost of treating each case of a disease, rather than higher numbers of cases.  The researchers behind the revised accounts also believe the disease approach will allow for better analysis of “value” or outcomes for a given amount of spending.  The researchers acknowledge that there is more work to do to refine the new approach; for example, a lot of health spending is concentrated on individuals with multiple diseases, so there is a natural difficulty in how to assign various costs to each disease.  Under the new method, you can quickly see which disease account for the greatest spending and the spending growth rates for diseases.  Circulatory, respiratory, metabolic, mental and cancer diseases are the largest categories, with infectious and metabolic disorders having the most rapid growth in spending.

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