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Can A Disease-Based Price Index Improve the Estimation of the Medical Consumer Price Index?

Can A Disease-Based Price Index Improve the Estimation of the Medical Consumer Price Index?

Chapter:
(p.329) 8 Can A Disease-Based Price Index Improve the Estimation of the Medical Consumer Price Index?
Source:
Price Index Concepts and Measurement
Author(s):
Xue Song, William D. Marder, Robert Houchens, Jonathan E. Conklin, Ralph Bradley
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226148571.003.0009

This chapter discusses some of the issues involved in implementing the approach of the pricing of medical services. The inclusion of medical care in the chapter highlights the issue of what prices should be used in the Consumer Price Index (CPI). Traditionally, the U.S. CPI collected prices on the goods and services used as inputs to health care—prescription drugs, office visits, surgical procedures etc.—and this appeared to be consistent with a Cost-of-Goods Index framework. It was found that, during the 1990s, a shift was made in the CPI Hospital Services component to pricing patterns of treatment for specific conditions, rather than the individual inputs. Comparing disease-based indexes to indexes simulated using current CPI methodology for New York, Philadelphia, and Boston, the authors suggest that while the disease-based indexes may be superior, given the large standard errors, the differences among indexes were not significantly different in many cases.

Keywords:   Consumer Price Index, CPI, Cost of Goods, disease-based indexes, health care

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