Implications of Utilization Shifts on Medical-Care Price Measurement

The medical-care sector often experiences changes in medical protocols and technologies that cause shifts in treatments. However, the commonly used medical-care price indexes reported by the BLS hold the mix of medical services .fixed. In contrast, episode expenditure indexes, advocated by many health economists, track the full cost of disease treatment, even as treatments shift across service categories (e.g., inpatient to outpatient hospital). In our data, we find that these two conceptually different measures of price growth show similar aggregate rates of inflation over the 2003 to 2007 period. Although aggregate trends are similar, we observe differences when looking at specific disease categories.