Data Requirements for the Measurement of MCER

To develop a prospective measure of MCER requires longitudinal data, so that medical care expenditures observed prospectively over the course of a period—ideally a year—can be related to characteristics observed at the start of that period.1 Relevant baseline characteristics include those that are potentially predictive of medical expenditures. These include the following:

  • General health status
  • Chronic conditions—in particular, conditions that are associated with actual or potential expenditures
  • Health insurance coverage
  • Breadth of services/treatments covered
  • Potential liability for out-of-pocket costs—copays, deductibles, and caps on personal expenditures
  • Current health insurance premiums

Actual out-of-pocket expenditures for medical care in the prior year may be the strongest predictor of expenditures during the current year, and although they are not a baseline characteristic per se, these expenditures ought to be included in the development of a predictive model of prospective risk. Both premiums and other out-of-pocket expenditures should be included.

With longitudinal data, out-of-pocket medical expenditures and premiums over the course of the next year would be compared with resources over the same period to determine the economic burden imposed by medical expenditures. This burden measure would become the dependent variable in a model predicting economic risk in the second year from the set of baseline characteristics listed above. This model would then be applied to the data set used to estimate MCER on an annual basis. Requirements for the resources component include

  • Earned income
  • Unearned income, equivalent to the unearned component of Census money income
  • Cash value of in-kind benefits, such as the Supplemental Nutrition Assistance Program, school free and reduced-price breakfast and lunch programs, and housing assistance
  • Taxes paid—federal, state, and payroll
  • Work-related expenses, including child care and commuting
  • Liquid assets

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1 Chapter 4 also discusses the calculation of a retrospective measure of MCER using CPS ASEC data. We focus here on the preferred prospective measure, which requires longitudinal data.



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