the experimental health accounting and national income and product accounting purposes, as well as for price and productivity measurement.

Ideally, medical sector goods and services would be defined in such a way that: (1) expenditures could be estimated each period for every good or service produced by the industry, (2) meaningful quantities and prices (nominal and real) could be tracked, and (3) quality change of the goods and services could be monitored. The first task in the accounting exercise is to allocate nominal expenditures to the various array of outputs. Assuming that patients seek medical care to treat specific conditions or diseases, the medical care output should be defined and arrayed to reflect that consumption objective. Many of the researchers present at the workshop favor an episodes-of-treatment organizing principle for doing this.


During her presentation, Ana Aizcorbe identified several options for attributing spending across treatment episodes, or “disease buckets,” as several participants described them. One is an encounter-based method in which spending is attributed to one or to several diagnoses as reflected by data extracted from patient claims. A second, broader approach involves constructing episodes of treatment—which may include numerous encounters over a predefined period—then adding up dollars spent nationally on each of the range of diseases and conditions. A third possibility is a person-based approach, in which spending on various treatments is tracked on a person-by-person basis over a set period of time.

Within these approaches, there are different techniques available for assigning the dollars spent to the treatment categories. The applicability and appropriateness of the methods varies by the accounting objective, and each has its pros and cons. Aizcorbe conceded that, at this point, it is unclear which is the best way to move forward for BEA’s specific application. BEA is working both internally and with the Cutler-Rosen team to establish what the allocations may look like under the different methods, and whether it matters for estimating expenditures and prices (see Section 2.3.). Speaking about this project, which has begun producing episodes-of-treatment cost estimates, Allison Rosen noted that spending could also be further broken down into subcategories along functional lines, such as disease prevention, diagnosis, and screening activities. This is important, since not all spending on medical care can be attributed specifically to the treatment of a disease or condition.

Whichever method of allocating expenditures is used, it has to offer a solution to the comorbidity problem. Dealing with the reality that many patients utilize medical services for multiple conditions is a major issue to be confronted in health accounting. It is a problem on the expenditure side—BEA must figure out how to allocate spending for cases in which patients receive medical care

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