Author Description

This study introduces a new framework for measuring and analyzing medicalcare expenditures applied to the study of commercial medical-care markets. The framework focuses on expenditures at the disease level that are decomposed between price and utilization. These measures show that a particular MSA may have high overall prices, but may actually have low medical-care spending per episode due to low utilization. Prices within an MSA appear to be quite homogeneous, implying that regional factors explain a large degree of price variation. However, within an MSA there is a large degree of heterogeneity in utilization patterns between disease categories. This implies that most MSAs do not have systematically high or low utilization for all disease categories. We Önd evidence of a negative correlation between price and utilization across MSAs for many diseases, so it appears that the greater expenditures from higher prices are partly offset by lower utilization.