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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	Section
Trends in Expenditures	X					1.1
Trends in Out-of-Pocket Expenditures Only		X				1.2
Pooling Total Expenditures			X			2 (Guideline 1)
Pooling Expenditures by Type of Service (e.g. prescription medications)				X		2 (Guideline 2)
Pooling Out-of-Pocket Expenditures					X	2 (Guideline 3)
Projecting Total Expenditures			X			3 (Guideline 1)
Projecting Total Expenditures by Service Type				X		3 (Guideline 2)
Projecting Out-of-Pocket Expenditures					X	3 (Guideline 3)
Trends with Income Measures		X				4

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:

U.S. city average, Medical Care - 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 2011 total expenditure estimate in 2021 real (inflation adjusted) dollars, an analyst should multiply the 2011 estimate of $1331 billion by a factor of (110.220/91.466) (obtained from Table 2). When compared to actual expenditures in 2021 of $2297 billion, this inflated expenditure estimate ($1604 billion) indicates that about $693 billion more was spent on health care in 2021 than 2011, 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 April 2024)**
Year	GDP¹	CPI²	PCE¹
1977*	31.148	60.6	30.176
1987*	53.126	113.6	52.802
1996	68.156	156.9	69.203
1997	69.337	160.5	70.407
1998	70.102	163.0	70.967
1999	71.084	166.6	72.001
2000	72.709	172.2	73.822
2001	74.385	177.1	75.302
2002	75.500	179.9	76.291
2003	77.012	184.0	77.894
2004	79.069	188.9	79.827
2005	81.537	195.3	82.127
2006	84.074	201.6	84.440
2007	86.352	207.342	86.607
2008	87.977	215.303	89.170
2009	88.557	214.537	88.921
2010	89.618	218.056	90.514
2011	91.466	224.939	92.804
2012	93.176	229.594	94.534
2013	94.786	232.957	95.781
2014	96.436	236.736	97.121
2015	97.277	237.017	97.299
2016	98.208	240.007	98.284
2017	100.00	245.120	100.00
2018	102.290	251.107	102.047
2019	104.008	255.657	103.513
2020	105.407	258.811	104.635
2021	110.220	270.970	109.001
2022	117.996	292.655	116.043
2023	122.283	304.702	120.380

¹ Bureau of Economic Analysis, National Income Product Accounts Tables, https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2%23reqid%3D19&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 April 25, 2024.

Note: Since the April 2023 update to this webpage, the index reference year was changed from 2012 to 2017. That change is reflected here.

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:

U.S. city average, All items - CUUR0000SA0
All items in U.S. city average, all urban consumers, not seasonally adjusted

Note: Indices are revised periodically. Data last accessed April 25, 2024.

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 April 2024
Industry/Commodity or Service	PCE - Health	PHC (Overall)	PHC - Hospital care	PHC - Physician/ clinical services	PHC - Other professional services	PHC - Dental services
1977*	15.697	19.2	16.8	28.3	20.1	12.9
1987*	36.113	41.8	38.3	58.0	43.3	27.3
1996	60.446	61.0	57.8	75.2	62.0	45.8
1997	61.621	62.0	58.2	76.0	64.2	48.0
1998	62.824	63.3	58.7	77.6	65.7	50.0
1999	64.351	64.9	59.7	79.2	67.1	52.3
2000	66.234	66.8	61.3	80.6	68.4	54.7
2001	68.563	69.3	63.4	82.9	70.8	56.9
2002	70.468	71.3	66.3	82.9	72.6	59.5
2003	72.977	73.7	69.2	84.3	74.8	61.9
2004	75.543	76.3	72.6	86.0	76.9	64.9
2005	77.886	78.7	75.3	87.7	79.0	68.6
2006	80.348	81.1	78.6	88.5	81.2	72.2
2007	82.978	83.7	81.3	92.0	83.5	75.9
2008	85.121	86.0	83.8	93.0	86.9	79.8
2009	87.462	88.3	86.3	95.1	88.7	82.2
2010	89.740	90.7	88.9	97.4	90.6	84.4
2011	91.560	92.6	90.8	98.7	91.9	86.3
2012	93.374	94.3	93.0	99.9	92.8	88.3
2013	94.511	95.7	95.1	99.9	94.4	91.4
2014	95.828	97.0	96.3	100.5	95.7	93.3
2015	96.830	97.6	97.2	99.4	96.5	95.7
2016	98.349	98.7	98.3	99.6	97.6	98.4
2017	100.0	100.0	100.0	100.0	100.0	100.0
2018	101.745	101.5	102.4	100.7	100.3	102.7
2019	103.227	103.0	104.5	101.6	101.1	105.0
2020	105.419	105.1	107.9	102.7	102.3	108.2
2021	107.549	107.3	111.2	105.0	104.8	110.6
2022	110.214	109.8	114.3	105.6	109.1	115.1

**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 April 2024**
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 - Prescription drugs⁴
1977*	18.3	22.4	31.4	32.1	57.0	11.008
1987*	36.5	51.1	66.0	59.2	130.1	27.097
1996	54.6	73.2	90.5	81.8	228.2	46.746
1997	56.5	75.8	92.0	83.0	234.6	47.978
1998	58.5	78.0	93.3	84.6	242.1	49.767
1999	60.0	78.6	93.6	85.3	250.6	52.616
2000	62.7	81.5	94.1	87.0	260.8	54.925
2001	65.5	83.7	95.2	88.4	272.8	57.908
2002	67.4	85.5	95.2	88.5	285.6	60.910
2003	68.9	85.9	96.3	88.7	297.1	62.796
2004	71.4	87.9	96.2	90.1	310.1	64.875
2005	73.3	88.9	95.6	91.4	323.2	67.165
2006	75.0	89.4	97.6	93.5	336.2	70.032
2007	77.3	91.0	99.2	95.0	351.054	71.044
2008	80.5	92.5	100.3	95.8	364.065	72.800
2009	82.5	94.0	102.7	96.9	375.613	75.258
2010	85.4	95.0	102.6	96.7	388.436	78.485
2011	88.0	95.0	101.2	97.3	400.258	81.787
2012	90.0	95.7	102.0	98.3	414.924	84.706
2013	91.9	95.7	102.0	98.8	425.134	85.174
2014	94.2	96.5	101.1	99.5	435.292	88.208
2015	96.0	97.6	100.4	99.1	446.752	92.244
2016	98.7	99.1	99.2	99.8	463.675	96.708
2017	100.0	100.0	100.0	100.0	475.322	100.000
2018	101.6	102.4	99.5	100.9	484.707	101.615
2019	103.7	105.4	99.9	102.4	498.413	101.379
2020	106.9	108.6	99.0	101.5	518.876	102.398
2021	112.6	110.8	98.4	100.3	525.276	100.534
2022	117.3	113.5	102.7	104.1	546.554	102.753

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&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 April 25, 2024.

Note: Since the April 2023 update to this webpage, the index reference year was changed from 2012 to 2017. That change is reflected here.

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 April 25, 2024.

Note: Since the April 2023 update to this webpage, the index reference year was changed from 2012 to 2017. That change is reflected here.

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:

U.S. city average, Medical Care - 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
Semi-Annual

Data last accessed April 25, 2024.

Note: Since the April 2023 update to this webpage, the index reference year was changed from 2012 to 2017. That change is reflected here.

* 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 2017. 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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