Expanding the National Health Expenditure Accounts (NHEA) Technical Documentation - Chapter 6

Accurately and comprehensively tracking health care spending by Americans is a primary purpose of U.S. government agencies, economists, and health service researchers. The National Health Expenditure Accounts (NHEA) provides the most comprehensive estimate of heath care spending on personal health care, public health activities, government administration, and public health investment in research and construction..

While NHEA provides invaluable aggregate data on health spending trends, it lacks the individual level data for detailed policy analysis, and also understanding the trends or services that are driving the health care spending. A significant effort, in health policy, is to distinguish between efficient and inefficient expenditures. How much of what we spend on cardio vascular disease is appropriate and how much is not? If we spent more on screening for disease at earlier stages, what would be the impact on cost per year of quality-adjusted life? To better address these questions, we need more information on the detailed components of spending than is available in the aggregated National Health Expenditure Accounts alone.

Researchers often use personal or household level surveys of medical utilization and expenditure for policy analyses. The most commonly used is the Medical Expenditure Panel Survey (MEPS). The MEPS offer detailed self-reported information on medical spending for each medical service used by survey respondents. The previous reconciliation studies by the Agency for Healthcare Research and Quality (AHRQ), the Centers for Medicare and Medicaid Services (CMS), and other researchers used the MEPS and its precursor surveys (Meara et al., 2004; Selden et al., 2001; Sing et al., 2006). The standard approach has been to align NHEA and the MEPS in terms of their covered population, covered services, and grouping of services, and then compare total medical spending between the sources. Sing et al. (2006) found that when MEPS and the NHEA adjusted on a consistent basis, their expenditure estimates differ by about 14%.

We make an adjustment for the variance between MCBS survey spending and NHEA national spending estimates for each year between 1999 and 2009. Total health spending reported in national health surveys is lower than the totals reported in the National Health Expenditure Accounts.  To account for this, we make three types of adjustments. First, we remove expenditures from the NHEA for goods and services which are out of scope of the surveys: other non-durable medical equipment (2.8%), other personal healthcare (2.6%), graduate medical education and disproportionate share medical payments to hospitals, hospital non–patient revenue such as in the gift shop and for parking, and spending by foreign visitors.  In total, this accounts for about 11% percent of NHEA spending. 

Second, we redefine some categories of medical services in the NHEA and MCBS, shifting expenditures as appropriate, to create consistent categories between the two sources. Third, we then proportionately increase spending in the MCBS by the factors necessary to have total survey spending equal the remaining portion of the NHEA total in each service-by-payer category. This paper focuses on the NHEA-reconciled estimates from MCBS.

Figure 6a gives the adjustment factors by each service category. Overall, the NHEA adjusted spending is 11 percent higher than the total spending reported in MCBS.

Table 6a (below) gives the NHEA adjusted total and average medical spending in 2009 adjusted to $2010 US dollars, using the GDP deflator. We present these results separately for three age groups – 65-74, 75-84, and 85+ -- and for six different services including hospital, physician and clinical services and durable medical equipment (DME), nursing home, prescription drugs, dental, and home health services. In 2009, total personal health care spending in United States for the elderly was estimated to be $644 billion (in 2010 US $), with per capita spending of $17,480. On average, Medicare beneficiaries aged 65 to 74 spend $13,500 annually on personal health care. For this group, the average spending on hospital related services is approximately $5,000 and for physician and clinical services including durable medical equipment (DME) the average spending is nearly $4,000. The average spending on nursing homes for this group is much lower as compared to older beneficiaries, about $1,000. The average spending for beneficiaries aged 75-84 is 38% higher than for beneficiaries 65-74, about $18,500 annually.  Spending is substantially higher for hospital care, nursing home, and home health care. As expected, beneficiaries 85 years and older spend even more.  A typical person aged 85+ spends on average $26,700 annually with major spending on nursing home care ($9,000), hospital care ($7,600) and home health ($3,000).

Table 6a: NHEA Adjusted Spending by Service Types: 2009

Note: Total and averages are weighted using final sample weights in 2009, MCBS. MCBS is matched to adjusted NHEA for all the above service categories. Here, N=6,200 and weighted N=36,824,486.

Selden et al. (2001) and Sing et al. (2006) attempted reconciliations between NHEA and MEPS for 1996 and 2002, respectively. In their work, MEPS-reported expenditures were reconciled with the comparable components of NHEA expenditures, omitting the institutionalized population and their spending.