Medicare's Bending Cost Curve. July 28, 2014. Exhibit A.1 Methodology used to calculate percentages in Table 4

07/28/2014

The percentages under the Price column are calculated by dividing the ratio of the average per capita spending growth rate for a service category for 2009-2012 over the 2000-2008 rate by the ratio of the average per capita utilization growth rate for a service category for 2009-2012 over the 2000-2008 rate (see Equation 1 below). This estimates the portion of a service category’s spending growth slowdown that is attributable to price growth, which may include both changes in fee schedule amounts and case mix.

Equation 1.

Equation 1

This equation is derived from Equation 2, which represents the relationship between spending, price, and quantity (utilization).

Equation 2.

Spending = Price X Quantity

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