Medicare's Bending Cost Curve. July 28, 2014. IV. Contributions of Price and Utilization


The previous sections focus on the service categories that contributed the most to the slowdown in per beneficiary spending growth between 2000-2008 and 2009-2012. For further examination of these trends, we estimated the contributions of price and utilization to the slowdown within each service category. Definitions for each of the utilization measures used in this analysis can be found in the Appendix (see Table A.2). It is important to note that this is a different analysis from evaluating the contribution of changes in price and utilization to spending growth. For instance, a service category’s spending growth could have been primarily due to growth in utilization over time with prices remaining largely unchanged, however; utilization could also be contributing to a reduction in the service category’s growth rate if the rate of growth in utilization is decelerating over time. The methodology used to calculate the percentages in this table is provided at the end of the Appendix (see Exhibit A.1).

Table 3 displays the results of this analysis. The results suggest that with the exception of Other Inpatient, Other Part B, and Dialysis, the contribution of each service category to the slowdown in expenditure growth was attributable mostly to reductions in utilization over this period, although prices have played a meaningful role, particularly for some categories of spending. It is important to note that our measure of price growth includes both changes in payment rates and case mix. Hence, while payment rates for a particular service category may have been reduced other factors affecting case mix may have increased overall price growth. For instance, a shift in care for lower acuity patients from the inpatient to outpatient settings leaves a higher average case mix behind in the inpatient setting.12

12 It is also important to note that we selected measures of utilization that were available in the MBSF file, meaning that we do not have a measure for every aspect of utilization. For instance, in the case of dialysis, Medicare began to implement a prospective payment system beginning in 2011. After implementation, there may have been reductions in utilization occurring within each bundled event.

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