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 Bureau of Labor Statistics 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 2003-2007 period. Although aggregate trends are similar, we observe differences when looking at specific disease categories.