The measurement of the output of the medical care system is necessary to assess the productivity levels and growth of a country's economy and medical care system. Medical price indexes have uses other than those involving output and productivity measurement. In the United States, both within the health sector and more generally, contracts occasionally contain provisions that depend on growth of the medical Consumer Price Index (CPI). The CPI and the Producer Price Index (PPI) are also employed in updating fee schedules for certain administered pricing schemes and payments to some health...

The measurement of the output of the medical care system is necessary to assess the productivity levels and growth of a country's economy and medical care system. Medical price indexes have uses other than those involving output and productivity measurement. In the United States, both within the health sector and more generally, contracts occasionally contain provisions that depend on growth of the medical Consumer Price Index (CPI). The CPI and the Producer Price Index (PPI) are also employed in updating fee schedules for certain administered pricing schemes and payments to some health plans. This chapter reviews the measurement issues underlying the construction of medical care price indexes. It describes procedures employed by the U.S. Bureau of Labor Statistics in the construction of its medical CPIs and PPIs (including recent revisions and changes). It also discusses alternative notions of medical care output that involve the price of a treatment episode rather than the prices of fixed bundles of inputs. Finally, the chapter outlines salient features of a new price index for health expenditures.