Academic journal article Health Care Financing Review

Revisions to the National Health Accounts and Methodology

Academic journal article Health Care Financing Review

Revisions to the National Health Accounts and Methodology

Article excerpt

Revisions to the National Health Accounts and methodology


The need to implement revisions to the National Health Accounts (NHA) has been brewing for several years. During the past decade, major, dramatic changes have been occurring in the structure of the health care industry. Among those changes are the shift of many services from inpatient settings to outpatient hospital and freestanding facilities; the rise of outpatient clinics; and the dispensing of prescription drugs at sites other than community pharmacies (e.g., through grocery and department store pharmacies and through mail-order pharmacies).

Accompanying these structural changes have been innovations in the mechanisms used to finance health care. These changes were prompted primarily by business, which sponsors a large proportion of private health insurance and which was facing substantial increases in the cost of this fringe benefit. In an effort to contain costs, employers experimented with delivery of care through health maintenance organizations (HMOs) and preferred provider organizations: with utilization reviews, mandatory second opinions, and required outpatient treatment for specific procedures; and with higher copayments and deductibles for services. In addition, many companies opted to self-insure, turning to the insurance industry for administrative services and/or insurance against excessive losses. Recent changes in law require employers who offer health insurance to cover working people over age 64; further, those policies must pay before Medicare pays. In addition, changes to accounting standards will force emloyers to make allowances for anticipated costs of retiree health benefits, with a significantly adverse effect on balance sheet bottom lines.

Simultaneously, the deterioration of data upon which the historical methodology had been based, as well as the arrival of new data sources, necessitated development of revised methods. As a result of budget cuts in the mid- to late 1970s, the Internal Revenue Service (IRS) was forced to reduce the size of the sample of income tax returns used to prepare its Statistics of Income (SOI). This annual tabulation had formed the basis for estimates of national expenditures for professional services, but the reduced sample size resulted in erratic estimates of year-to-year growth that severely limited the usefulness of the SOI to make time-series estimates of health spending. During this same period, existing insurance industry measures were unable to cope with the rapid changes that occurred in the health insurance marketplace.

Fortunately, new data sources have emerged to supplement the traditional data sources used to estimate national health expenditures (NHE). The Bureau of the Census enlarged the sample in its survey of service establishments, providing good estimates of the year-to-year change in business receipts. The Bureau of Labor Statistics (1960-88) Consumer Expenditure Survey was converted from an intermittent survey into a quarterly one, providing a continuous flow of information for out-of-pocket spending by type of service. The American Hospital Association (1980-87), American Medical Association (1984-88), and American Dental Association (1980-87) now conduct surveys that provide valuable insights into the sources of revenue received by their members. Finally, the Employment Cost Index (ECI), which began in 1980, coupled with the Consumer Expenditure Survey, can be used to validate insurance premium levels (Bureau of Labor Statistics, 1980-88).

The historical methods made the best of data that was available at that time. New methods and sources have enhanced the ability to accurately measure health care spending trends.

Benchmark process

In 1984, a group of NHA experts met to determine the future direction of the NHA (Lindsey and Newhouse, 1986). This meeting initiated the benchmark process. …

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