1 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Medical Care in the 

Consumer Price and Producer Price Programs

Kelley Khatchadourian, Consumer Price Program

Melanie Santiago, Producer Price Program

Data Users’ Conference

April 21, 2021
2 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Agenda

 Importance of Health Care in the Economy

 Definitions and Indexes

 Methodology

 Disease Based Price Indexes

 Recent Changes

 Upcoming Projects and Research
3 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Importance of health care in the U.S. economy

National Health Expenditures in 2019 = $3.8 Trillion

$11,582 per person

17.7% of GDP

Source: Centers for Medicare & Medicaid Services, National Health Expenditures, 2019 Highlights
4 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Who pays for health care?

 Private Insurance 31%

 Medicare 21%

 Medicaid 16%

 Out of Pocket 11%

Source: Centers for Medicare & Medicaid Services, National Health Expenditures, 2019 Highlights
5 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI & PPI definitions and indexes
6 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Hospital services indexes

50

70

90

110

130

150

170

190

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21

Index

CPI PPI
7 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Physicians’ services indexes: 2009-2021

75

85

95

105

115

125

135

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21

Index

CPI PPI
8 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

PPI vs. CPI: How do they differ?

Sources of Payment Geographic Scope Level of Detail

Weight Sources Revisions
9 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI health care indexes

 Medical Care

Medical Care Services

– Professional Services

• Physician Services

• Dental Services

• Eyeglasses and Eye Care

• Services by Other Medical Professionals

– Hospital and Related Services

• Hospital Services

• Nursing Homes and Adult Day Services

• Care of Invalids and Elderly at Home

– Health Insurance

Medical Care Commodities

– Medicinal Drugs

• Prescription Drugs

• Non-Prescription Drugs

– Medical Equipment and Supplies
10 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI medical care indexes by city 2009-2020

90

100

110

120

130

140

150

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21

Index

All Cities New York Chicago LA
11 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI medical care indexes by item 2009-2020

80

100

120

140

160

180

200

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21

Index

All Items Medical Care Commodities Physicians' Services Hospital Services Health Insurance
12 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

PPI family of indexes

Industry

Commodity

Final 

Demand

Intermediate 

Demand

Net Inputs to 

Industries
13 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

PPI health care indexes by NAICS industry

 Ambulatory Health Care Services

Offices of Physicians

Offices of Dentists

Medical Laboratories

Diagnostic Imaging Centers

Home Health Care Services

Blood and Organ Banks
14 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

PPI health care indexes by NAICS industry (cont.)

 Hospitals

General Medical and Surgical Hospitals

Psychiatric and Substance Abuse Hospitals

Other Specialty Hospitals

 Nursing and Residential Care Facilities

Nursing Care Facilities

Residential Developmental Disability Homes
15 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

PPI industry indexes related to health care

 Pharmaceutical Preparation Manufacturing

 Electromedical Apparatus Manufacturing

 Surgical and Medical Instrument Manufacturing

 Surgical Appliance and Supplies Manufacturing

 Dental Equipment and Supplies Manufacturing

 Ophthalmic Goods Manufacturing

 Retail Pharmacies and Drug Stores

 Health and Medical Insurance Carriers
16 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Selected health care services industries

80

90

100

110

120

130

140

150

Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19

Index

Selected Health Care Services Physicians Dentists

Medical and Diagnostic Laboratories Home Health Care Blood and Organ Banks

Hospitals Nursing Care Facilities Residential Developmental Disability Homes
17 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

PPI health care commodity indexes

PPI Health Care Commodity Indexes Relative Importance in 

Final Demand - Dec 2020

Health Care Services 17.7

Outpatient Care 10.7

Physician Care 4.1

Medical Laboratory and Diagnostic Imaging Center Care 0.3

Home Health and Hospice Care 0.7

HospitalOutpatient Care 4.3

Dental Care 1.2

Inpatient Care 7.0

Hospital Inpatient Care 5.4

Nursing Home Care 1.3

Intellectual and Developmental Disability Center Care 0.3

Sales of Blood and Blood Products, Organs, and Tissues 0.1
18 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Health care services indexes by payer

90.0

95.0

100.0

105.0

110.0

115.0

Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19

Index

Medicare Patients Medicaid Patients Private Insurance Patients All Other Patients
19 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Input to industry indexes

 Official Series - January 2015

Inputs to Offices of Health Practitioners

 Satellite Series – September 2020

Inputs to Ambulatory Health Care Services

Inputs to Hospitals

Inputs to Nursing and Residential Care 

Facilities
20 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Methodology
21 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Matched model

 Goal: Measure price change for a unique item

 Steps (at a high level):

1. Select a sample of providers

2. Select a unique service

3. Track price change for the same service by a particular 

provider over time

4. Calculate indexes
22 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Provider sample selection

Population

Sample
23 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Service selection
24 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

What is priced in the health care industries?

 Physicians and dentists:

per visit or per treatment

 Hospitals: 

per stay for inpatient, per treatment for outpatient

 Medical Labs, Diagnostic Imaging Centers, and Blood Banks:

Per test or per unit

 Home Health Care Services:

Per billing period (hour, week, month, etc.)
25 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

What is the price for a health care service?

 Price = Reimbursement

 Reimbursement ≠ Bill

 Total reimbursement may include payments from multiple 

payers

≠
26 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Eligible sources of payment

Source of Payment CPI PPI

Direct payments from patients  

Private insurance  

Medicare Parts B&C Parts A, B, C

Medicaid 

Other third party payers 
27 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Physicians’ services indexes: 2014-2015

98

99

100

101

102

103

104

Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

Index values, June 2014 = 100

CPI PPI
28 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

PPI physician care by type of payer

80

85

90

95

100

105

Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

Index

Medicaid Medicare Private Insurance All Other Patients
29 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

The important role of weighting of indexes
30 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI medical care weights

Consumer Price Index (CPI) Dec-2020 Relative Importance

Medical care 8.9

Medical care commodities 1.6

Medicinal drugs 1.5

Prescription drugs 1.1

Nonprescription drugs 0.4

Medical equipment and supplies 0.1

Medical care services 7.3

Professional services 3.7

Physicians’ services 1.8

Dental services 1

Eyeglasses and eye care 0.4

Services by other medical professional 0.5

Hospital and related services 2.4

Hospital services 2.2

Nursing homes and adult day services 0.1

Care of invalids and elderly at home 0.1

Health insurance 1.2
31 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI health insurance

 How to track the cost of health insurance?

Track out-of-pocket premiums

 Cannot control for plan quality

Changing benefits

 Indirect retained earnings method

Track the cost of health insurance
32 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Retained earnings

Figure A. Breakdown of health insurance premium components 

Health insurance premiums

Retained earnings

Reimbursements for 

medical goods and 

services (benefits 

paid out)
33 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Retained earnings relative

RRRRRRRRRRRRRRRR EE EE EEEETT−1

BB BB TT−1

ππ 2

RRRRRRRRRRRRRRRR EE EE EEEETT

BB BB TT

1/12

= Monthly RE 

relative
34 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Index aggregation

Monthly RE 

Relative

Physicians’ 

Services 1M % ( x (

Monthly RE 

Relative

Hospital 

Services 1M % ( x (

Monthly RE 

Relative

Prescription 

Drugs 1M % ( x (

Health 

Insurance 

Index
35 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Reassigning weight
36 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI health insurance (cont.)

 Effects of indirect method of pricing health insurance

Increases relative shares of other medical care items

Includes payments by third parties when measuring prices for 

medical care

 Medical Care Factsheet
37 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Disease based price indexes
38 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

What are disease based price indexes?

 Measure changes in the average 

price level to treat an episode of 

specific disease

 Includes all goods and services 

prescribed in the episode, from 

all providers:

Medical procedures

Drugs

Office visits
39 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

How are disease based indexes different?

 Specific medical condition vs. specific goods and services

 Changes in utilization of services for treating a disease

 Include technological improvements

Type of treatment: drugs vs. surgery

Intensity of treatment: inpatient vs. outpatient
40 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Disease based price indexes

 First published in July 2015

 Quantities from Medical Expenditure Panel Survey (MEPS)

 BLS price data from both CPI and PPI

 Update monthly about 1-2 weeks after release of CPI & PPI

 Disease Based Price Index background, methodology, and data
41 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

A comparison of the growth of the disease based price index with the 

traditional medical price index, 1999-2016

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Disease-based price index

Traditional medical index

“The cost of care: new insights into healthcare spending growth,”Beyond the Numbers: Prices & Spending, 

vol. 6, no. 7 (U.S. Bureau of Labor Statistics, June 2017)
42 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Recent changes & research
43 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI physicians’ services index

 Medical Expenditure Panel Survey (MEPS) weights by payer-type

 Better reflects current market weights 

 Increases the share of payments covered by private insurance 

relative to self-pay and Medicare part B 

weighting by payer-type
44 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Physicians’ Services Indexes March 2018-February 2021

90

95

100

105

110

Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20

Index

CPI PPI
45 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Recent PPI changes

 Publishing by ICD Chapter instead of MDC

 CPI/PPI Hospital Data Sharing

 New Input to Industry Health Care Indexes

 Use of Corporate Data

Respondents provide data files with transaction level data for all 

services provided for the month
46 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

CPI ongoing projects and research

 Using medical claims data in the CPI

AEA paper

 Reduce respondent burden and increase participation

 Improve the health insurance index

Timeliness improvement

CNSTAT to review methodology
47 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

PPI ongoing projects and research

 Using medical claims data in the PPI

 Evaluating changes to CMS payment models and the impacts on 

medical care prices and PPI quality adjustment methods

 Monitoring the impact of the COVID-19 pandemic on health 

care providers, services, and prices

 Research into covering additional industries in the healthcare 

sector
48 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Cross-program research

 Research into quality adjusting disease based price indexes – use 

of Medicare claims data

 Potential application of this research to CPI and PPI indexes 
49 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Kelley Khatchadourian, Supervisory Economist

Consumer Price Program

Khatchadourian.Kelley@bls.gov

Melanie Santiago, Services Section Chief

Producer Price Program

Santiago.Melanie@bls.gov

Contact information