health. Even if, ultimately, the goal is to measure the price of an incremental gain in health, Shapiro argued that, for economic accounting purposes, one is driven by the logic of the disease by disease approach, which was the focus of much of the workshop.

A key question, raised by Steve Heffler (Centers for Medicare and Medicaid Services), is how the methods for parsing nominal expenditures by disease (described in Chapter 2) relate to appropriate price measurement. Ana Aizcorbe responded that those working on satellite accounts—the Cutler-Rosen group or BEA—first establish a number of disease “buckets” that make sense to the medical community; these buckets become the unit of observation for which spending and health effects data are collected. The dollar total spent per patient on a particular category—for example, diabetes—becomes the price for the newly defined unit of health service. Then, nominal spending on diabetes is given a weight based on its share of total medical care spending.1 Likewise, indexes for each disease category are weighted then aggregated. Aizcorbe cautioned that BEA is still in the phase of attempting to figure out the best way to define diseases, and that developing these kinds of indexes is still a ways off. BEA has purchased some databases covering patients who are commercially insured with the intention of experimenting with different types of indexes and different ways of defining diseases.

In this context, Aizcorbe described the most important problem with producer price indexes for purposes of the satellite account envisioned by BEA: they do not identify the medical care good or service that is sought by the consumer—which most think should be the treatment of a particular disease or condition. She added that health economists have developed the conceptual tools that are needed to remedy the situation, and that putting these approaches into practice is something that BEA would be working on right away.

Much of the academic literature has relied on patient claims data to provide a picture of price trends for treating specific conditions. The economic good has been defined as a completed episode. For example, for a heart attack patient, this may involve time and expenditures on a series of initial treatments plus those that take place during the recovery period. At the end of that episode, data are collected to estimate all dollars spent over the entire period; this forms the basis for pricing a completed episode.

To develop a comprehensive health care account with this kind of underpinning, claims data would be needed for as much of the population as possible; Medicare and Medicaid would provide large portions. However, there are some groups for which claims data will not be available—most obvious are the uninsured, who do not submit claims—so their spending would have to be measured another way. Patients from some kinds of institutions are also not typically


In a fully evolved price measurement program, tracking nominal dollars spent on treatments would be viewed as only a first step. As discussed in detail in Section 3.3., a fully meaningful price measure must ultimately also consider how the quality of a treatment changes over time.

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