Disaggregated annual health services expenditures: their predictability and role as predictors

Risk-based capitation payments are among the fastest growing modes of reimbursement for health insurance. There is ongoing debate about whether the usual underwriting factors such as age and sex are sufficient for establishing annual premiums. This study examines the predictability of disaggregated annual services expenditures and their potential as predictors. The results show that outpatient services are generally more predictable than inpatient services. According to elasticity calculations, prior-year own-expenditures are the strongest predictors of annual expenditures. Of the own-expenditure elasticities, those pertaining to total and outpatient charges are the largest. Among prior year cross-expenditure elasticities, outpatient drug and outpatient office visit expenditures are the greatest.