Adjusting Health Expenditures for Inflation: A Review of Measures for Health Services Research in the United States

Objective: To provide guidance on selecting the most appropriate price index for adjusting health expenditures or costs for inflation.

Data sources: Major price index series produced by federal statistical agencies.

Study design: We compare the key characteristics of each index and develop suggestions on specific indexes to use in many common situations and general guidance in others.

Data collection/extraction methods: Price series and methodological documentation were downloaded from federal websites and supplemented with literature scans.

Principal findings: The gross domestic product implicit price deflator or the overall Personal Consumption Expenditures (PCE) index is preferable to the Consumer Price Index (CPI-U) to adjust for general inflation, in most cases. The Personal Health Care (PHC) index or the PCE health-by-function index is generally preferred to adjust total medical expenditures for inflation. The CPI medical care index is preferred for the adjustment of consumer out-of-pocket expenditures for inflation. A new, experimental disease-specific Medical Care Expenditure Index is now available to adjust payments for disease treatment episodes.

Conclusions: There is no single gold standard for adjusting health expenditures for inflation. Our discussion of best practices can help researchers select the index best suited to their study.