u.s. bls plans for developing disease based price indexes michael w. horrigan associate commissioner...
TRANSCRIPT
U.S. BLS Plans for Developing Disease Based
Price Indexes
Michael W. HorriganAssociate Commissioner
May 10th 2010
Presentation Outline
Motivation Recommendations for producing
disease based price indexes Issues and challenges in estimating
disease based price indexes CPI approach PPI approach Concluding remarks
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MOTIVATION
National Health Concern
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Health Inflation Compared to Overall Inflation
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Is this price growth alarming?
For over forty years, many claim that the CPI Indexes are upwardly biased.
Many believe that bias occurs because we use the wrong concept.
We price health care services and goods, and not the treatment of the disease.
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Disease based concepts for Medical Expenditure (Triplett, 1999) Patients use medical services for
human repair. Consumers use auto body shops for car repair.
For a car repair, the consumer pays one price, and the shop buys all the parts and labor to fix the car.
Patients do not pay one provider one price for a human repair.
They separately purchase physician visits, RX, etc. There is no market price for the entire treatment of diabetes, as there is for a car repair.
Triplett suggests reporting by disease and not service.
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Examples of potential upward bias in CPI medical indexes
Shift in the treatment of a cataract disease from in-hospital to out-patient facility care reducing the price of treating the disease – Shapiro and Wilcox (2001).
Substitution from office visits to the use of pharmaceutical medications reducing the cost of treating mental illness - Berndt et al (2000).
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Major Medical InnovationsAffecting Input Use
Innovation Service/Product Disease TreatedMRI and CT Diagnostic/Phys.
Visitsvarious
ACE inhibitors RX/Hospitals hypertension
Balloon angioplasty Surgery/Hospitals coronary artery disease
Statins RX/Hospitals high blood cholesterol
Mammography Diagnostic breast cancer
Coronary Bypass Surgery coronary artery disease
H2 blockers RX stomach
SSRI anti-depressants RX/Therapy Visits depression
Cataract extraction Inpatient/Outpatient cataracts
Hip and knee replacement Inpatient/Outpatient orthopedic
Biopharmaceuticals RX/Hospitals/Phys. mostly cancer
RECOMMENDATIONS FOR PRODUCING DISEASE
BASED PRICE INDEXES
Recommendations Triplett (1999) proposed that BEA and the NHEA
report medical expenditures by disease.
At What Price (2002), Recommendation 6-1, established a methodology for measuring disease based price indexes. Use “claims database to identify and quantify the inputs
used in” the treatment of a disease. “On a monthly basis, the BLS should reprice” current
medical inputs keeping the quantities fixed. “every year or two” update the quantities of inputs used
to treat a disease. When updated, “the index will jump at the linkage
points.”11
Recommendations CNSTAT panel - Strategies for a BEA Satellite
Health Care Account (2009)
Set up to review plans by the U.S. Bureau of Economic Analysis to create a BEA satellite account that reports medical PCE by disease.
Very interested in U.S. BLS Producer Price Index Program to produce disease based price indexes
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ISSUES AND CHALLENGES IN ESTIMATING DISEASE BASED PRICE INDEXES
Issues and challenges
An episode of treatment often, if not always, cross provider classes Treatment protocol and
reimbursement requirements– Eg., knee replacement surgery
Actual path of discovery and treatment can vary widely
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Issues and challenges Episode of treatments is not a concept for
which universe frames exist for drawing stratified probability samples based on revenue.
Second best alternative is to aggregate across provider classes by mapping coding structures for each provider to diseases
Challenge and growing problem of co-morbidities
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Issues and challenges
Protocols for treating disease can change over time Changes in protocols can occur within
and across provider classes Some changes in protocols may
represent a quality change of the same protocol
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Issues and challenges
Deciding when a substitution has taken place is difficult Independent medical expertise Comparativeness effectiveness
research Penetration rate of substitute protocols Need to continue pricing the old and
new treatment protocols after deciding a substitution has taken place?
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CPI APPROACH
Using the Medical Expenditure Panel Survey
(MEPS)
MEPS does a survey for medical expenditures and medical utilization. Substitutions toward less costly inputs should be in the data.
It is representative of the civilian non institutionalized population.
It surveys both households and providers on the disease contracted and the use of goods and services to treat those diseases.
There is no charge for use.
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Using MEPS to Generate Price Indexes Organized by Disease
Merge the MEPS Conditions file and Event Files
For each disease get per patient input quantities.
Use CPI monthly relatives for physicians, RX, and hospitals to measure monthly price growth.
Each year the quantity of the inputs used for each disease are updated. If there is a substitution to a less expensive input, there will be a downward jump in the index.
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Average per Patient Quantities(Utilizations)1998-2004
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Mental Disorders Example
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Ye ar O ffi ce
V is i t M e an
M e an H o s p i ta l
A d m is s io n s
M e an H o s p i ta l N u m b e r
o f N ig h ts
M e an Em e rg e n cy
R o o m V is i ts
M e an O u tp a ti e n t
V i s i tsM e an
P re s crip ti o n s
1998 4.73 0.05 0.95 0.03 0.44 1.861999 4.39 0.05 0.52 0.03 0.46 1.982000 4.50 0.03 0.29 0.03 0.33 2.022001 3.79 0.05 0.41 0.05 0.18 2.032002 3.88 0.04 0.39 0.04 0.18 2.012003 3.83 0.04 0.42 0.04 0.21 2.022004 3.99 0.03 0.40 0.04 0.22 2.06
1999- 2004 C u m m u lati v e In d e x G ro w th f o r M e n ta l D i s o rd e rs
A cco u n ti n g f o r le s s e x p e n s iv e in p u ts 7.20%F ix e d 1998 In p u ts 35.50%
Results
Expenditure Method
Fixed Quantities
Quantities
Updated Yearly
Adjusted for Co-
morbidities
Total Expenditures
35.85% 33.2% 30.91%
Out of Pocket Expenditures
28.31% 31.63% 30.57%
BLS CPIScope 30.32% 30.55% 28.81%
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Why Do the Results differ by Expenditure Method?
Most of the savings accruing from the shift from inpatient to outpatient hospital goes to third party payments.
Hospital prices are rising more rapidly than physician or pharmaceutical prices, and an index based on total expenditures has a higher hospital weight than an index based on out of pocket payments. Therefore both indexes for out of pocket payments are less than the index for total expenditures.
Consumers pay a very small fraction of total inpatient expenses. A shift from inpatient to outpatient for a disease category increases the share of out of pocket expenditures for treating that particular disease category.
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Accounting for utilization changes decreases the price
index for
Diseases of the respiratory systemOther conditionsDiseases of the circulatory systemDiseases of the genitourinary systemNeoplasmsDiseases of the musculoskeletal system and connective tissueDiseases of the digestive systemDiseases of the blood and blood-forming organsComplications of pregnancy, childbirth, and the puerperiumMental disorders
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Accounting for utilization changes increases the price
index for
Diseases of the skin and subcutaneous tissueInfectious and parasitic diseasesCongenital anomaliesInjury and poisoningDiseases of the nervous system and sense organsEndocrine, nutritional, immunity disorders (includes
diabetes and high cholesterol)
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Key Findings Increased utilization intensity for
diabetes, and cholesterol management. Largest index drop in Mental Disorders. The savings to third party payments
differs from out of pocket savings. The prices for inpatient hospital services
are rising faster than for other services. This has a greater impact on third party payments than out of pocket payments.
PPI APPROACH
PPI Future plans
U.S. Census Bureau is collecting revenue by chapter titles of the ICD-9 manual.
BLS can aggregate items from each of the following industries to these same disease categories: Hospitals (DRGs) Offices of Physicians (ICD-9, CPT) Diagnostic Imaging Centers (ICD-9) Medical Laboratories (ICD-9) Pharmacies (Primary Therapeutic Equivalent)
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PPI Future Plans
When does a substitution take place? Need for independent judgment on
changes in what is a change in the standard treatment protocol.
Plans to continue pricing each item for current medical price indexes even after a directed substitution has taken place and a price drop is recorded.
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PPI Future Plans
Quality change CMS data on adherence by hospitals on
adherence to standard protocols for heart attack, heart failure, and pneumonia.
Resampling and changes in weights (utilization rates) Laspeyres fixed quantity formula Resampling is done every 7 years.
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CPI and PPI Future Plans
CPI to update the results of their MEPS based research every year and publish it in a working paper on the BLS web.
PPI will get the Census weights in 2010 and begin calculating disease based price indexes in 2011. Use of MEPS data also being
considered32
Disease based price indexes and health care
reform
CPIs important in measuring whether or not health care reform lowered the out of pocket costs to consumers.
PPIs important in measuring the total costs of health care reform no matter the source of financing.
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Contact Information
Michael HorriganAssociate Commissioner
Office of Prices and Living Conditions
The CNSTAT FormulaePdit = Price of input service i used to treat disease d in period t.
Qdir = Quantity of input i used to treat disease d in period r.
When quantities are not updated:
When quantities are updated:
1
dit diri
dtdit dir
i
P QI
P Q
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1
1
1 1 1
1 1 1
Jump from Q change Price change only
dit diri
dtdit dir
i
dit dir dit diri i
dit dir dit diri i
P QI
P Q
P Q P Q
P Q P Q
Example - Mental Illness
3636
Price of Office Visit = $200 in period 1; = $220 in period 2.Price of RX = $30 in period 1; = $33 in period 2.The price of all inputs increase 10%.
Quantity of Office Visits = 4 in period 1 ; = 1 in period 2.Quantity of RX = 0 in period 1 ; = 4 in period 2.
The price of all inputs are up 10%.
Disease Based Index:
,2 ,2 ,2 ,2 ,1 ,2 ,1 ,2 ,2 ,2 ,2 ,2
,1 ,1 ,1 ,1 ,1 ,1 ,1 ,1 ,1 ,2 ,1 ,2
220*1 33*4 200*1 30*4 220*1 33*4
200*4 30*0 200*4 30*0 200*1 30
doc doc RX RX doc doc RX RX doc doc RX RX
doc doc RX RX doc doc RX RX doc doc RX RX
P Q P Q P Q P Q P Q P Q
P Q P Q P Q P Q P Q P Q
*4.44 .4 1.10
Index = Input Effect Price Effect