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Cost function estimation: the choice of a model to apply to dementia.

C K Andersen1, K Andersen, P Kragh-Sørensen

  • 1Institute of Public Health, Health Economics, University of Southern Denmark, Odense, Denmark. cka@sam.sdu.dk

Health Economics
|July 21, 2000
PubMed
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Estimating dementia healthcare costs requires careful statistical modeling due to skewed data. A two-part model, combining logistic regression and cost level estimation, best predicts annual healthcare expenditures for dementia patients.

Area of Science:

  • Health Economics
  • Biostatistics
  • Econometrics

Background:

  • Statistical analysis of healthcare cost data is challenging due to high variability caused by a few patients with extreme costs.
  • Predicting individual patient costs necessitates regression models that prioritize prediction accuracy.

Purpose of the Study:

  • To estimate the annual healthcare cost of dementia by developing a robust cost function.
  • To explore econometric issues in modeling skewed health care cost data.

Main Methods:

  • Regression models were employed to predict health care costs based on dementia severity, sex, age, marital status, and comorbidities.
  • Models included log-transformed dependent variables with re-transformation methods to estimate costs on the original scale.
  • Model performance was evaluated using Root Mean Square Error (RMSE), Mean Absolute Error (MAE), and Theil U-statistic.

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Main Results:

  • A two-part model, comprising a logistic regression for cost probability and a second stage for cost level, was selected as the best predictor.
  • The choice of model significantly influenced predicted annual healthcare costs, with estimates varying widely based on the model used.
  • The selected two-part model provided cost estimates ranging from DKK 44,714 for very mild dementia to DKK 197,840 for severe dementia.

Conclusions:

  • The two-part model offers a superior approach for estimating dementia-related healthcare costs compared to other regression techniques.
  • Accurate prediction of healthcare costs is crucial for resource allocation and policy-making in dementia care.
  • The study highlights the substantial economic burden of dementia, varying significantly with disease severity.