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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
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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