Decomposing the effect of four key determinants leading to increases in US health spending: 1996 – 2013

While it is well known that U.S. healthcare expenditure is on the rise, it is less clear what is driving that growth. In this research we decompose the increases in U.S. health expenditure from 1996 to 2013 across four distinct factors: population size and structure, epidemiological profile, utilization trends, and prices and technology. The U.S. Disease Expenditure (U.S. DEX) project provides estimates that allocate U.S. health expenditure by cause of disease or illness, functions of care, age, and sex over time. With these data, decomposition can be performed across different population groups and disease areas. For this presentation, we decompose changes in total expenditure, pediatric expenditure, and expenditure on the prevention, management, and treatment of ischemic heart disease (IHD).

To estimate the effects of changes in demography and epidemiology, we utilized population estimates, and disease prevalence and incidence estimates from the Global Burden of Disease 2013 study.  Data on volume, price, and expenditure of health care are obtained from the U.S. DEX research project. To estimate the effect of changes in utilization, we measure the number of medical visits per prevalent case, at the age-sex level. All data are obtained for 1996 through 2013. We use formal demographic decomposition methods to measure changes in health spending attributable to each of the four drivers.

Preliminary results indicate that changes in epidemiology and utilization between 1996 and 2013 explain very little of the increases in health spending. Changes in demographic structure, and the aging and growing of the U.S. population, explains more; although increasing prices and technology explain the lion’s share of increases health expenditure. These results vary for distinct causes, types of healthcare, and age groups. Understanding the causes of increased health expenditure can lead to more cost-effective interventions and policy setting to help contain the already growing cost of healthcare in the U.S. These estimates show that different factors are driving increases in expenditure for different causes and ages.