ity that the index will “jump” at the linkage points and whether a prospective smoothing technique should be used. (Recommendation 6-1)

Additionally, the panel concluded that a price index including a more broadly based measure of the changing cost of medical care would be valuable for a wide range of policy purposes.

BLS should include the portion of health insurance paid for by employers in one version of the CPI, perhaps calling it an “expanded-scope medical CPI.” Because many commonly used income measures exclude employer-provided benefits, and because the Consumer Expenditure Survey is based only on out-of-pocket expenditures, the original conception of the MCPI domain should still be maintained in constructing the traditional (flagship) CPI. The panel also recommends examining the practicality of including other employer-paid employee benefits (e.g., dental and cafeteria plans) in the expanded-scope CPI. (Recommendation 6-2)

To inform public policy discussions and to evaluate the performance of the U.S. health care sector, a medical care price index that encompasses purchases from all payers is needed.

A task force should be convened by the BLS, in collaboration with the Centers for Medicare and Medicaid Services and other appropriate agencies, to implement construction and publication of a total medical care expenditure price index, encompassing purchases from all health care payers—governments, private third-party insurers, and consumers. (Recommendation 6-3)

The most difficult issue in the construction of the MCPI concerns adjustments for quality change. New treatments can yield improved outputs in the form of extended and better quality life. The panel believes that an outcomes-based measure is in principle superior to an input-based measure, but we recognize the formidable measurement challenges and do not know how best to proceed. This area is new and requires a good deal more research, much of it interdisciplinary. After BLS has implemented Recommendation 6-1, it can then consider whether, how, and why the outcomes of the treatments for those diagnoses are changing over time, and finally consider how outcomes changes should best be evaluated in computing a quality-adjusted medical care price index.

INDEX DESIGN AND INDEX PURPOSE

The CPI and its individual components are used for a wide range of sometimes dissimilar purposes. In some cases different uses may call for different index designs. But no statistical index can perfectly match what is desired for a



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