User Notes

Healthcare Expenditure Definition and Measurement in MEPS

Topics covered in this user note include:

This user note is based on the documentation accompanying the Medical Expenditure Panel Survey Full Year Consolidated Files, created by staff at the Agency for Healthcare Research and Quality, Center for Financing, Access, and Cost Trends.

Healthcare Expenditures Definition

In the Medical Expenditure Panel Survey (MEPS), "Healthcare Expenditures" (expenditures) refer to monetary amounts paid for healthcare services. More specifically, expenditures in MEPS are defined as the sum of direct payments for care provided during the year, including out-of-pocket payments and payments by private insurance, Medicaid, Medicare, and other sources. Payments for over-the-counter drugs are not collected in MEPS. Indirect payments unrelated to specific medical events, such as Medicaid Disproportionate Share and Medicare Direct Medical Education subsidies, are also not included.

IPUMS MEPS Expenditure Variables

Several types of expenditure variables are available in the IPUMS MEPS, including those that summarize total amounts charged and paid for healthcare services received during the year, expenditure amounts by source of payment, and expenditure amounts by type of medical service and source of payment. The abbreviations that are generally associated with each type of payment source, medical setting, and provider type are summarized in Tables 1-3 below.

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Table 1. Payment Sources with IPUMS MEPS Abbreviations
Abbreviation (approximate) Payment Source
SELF Self or Family
MC Medicare
MA Medicaid
PRI Private Insurance
VA Veteran's Administration
TRI Tricare
OF Other Federal Sources -- Includes Indian Health Service, military treatment facilities, and other care provided by the federal government
OL Other State or Local Source -- Includes community and neighborhood clinics, state and local health departments, and state programs other than Medicaid
WC Worker's Compensation
OPR Other Private -- Any type of private insurance payments reported for persons not reported to have any private health insurance coverage during the year as defined in MEPS
OPU Other Public -- Medicaid payments reported for persons who were not reported to be enrolled in the Medicaid program at any time during the year
OS Other Sources -- Includes sources such as automobile, homeowner's, liability, and other miscellaneous or unknown sources
PTR Sum of Private and Tricare
OTH Sum of Other Federal, State and Local, Other Private, Other Public, and Other Sources

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Table 2. Types of Medical Services with IPUMS MEPS Abbreviations
Abbreviation Type of Medical Service
OB Office-based -- Medical provider visits that consist of encounters that took place primarily in office-based settings and clinics. Does not include care provided in other settings such as a hospital, nursing home, or a person's home.
OP Outpatient department -- Medical provider visits to hospital outpatient departments.
AM Ambulatory -- Medical provider and hospital outpatient combined visits.
ER Emergency room -- Visits to hospital emergency rooms.
ZN Zero-night inpatient hospital stay -- Hospitalizations in which the admission and discharge dates are the same.
HP Inpatient hospital stay -- Hospitalizations, including zero-night stays.
DV Dental -- Visits for dental care to general dentists, dental hygenists, dental technicians, dental surgeons, orthodontists, endodontists, and periodontists.
HH Home health -- Care received at home by paid or unpaid caregivers who do not reside with the person.
VS Vision -- Glasses and/or contact lenses.
OE Other equipment/supplies -- Ambulance services, orthopedic items, hearing devices, prostheses, bathroom aids, medical equipment, disposable supplies, alterations/modifications, and other miscellaneous items or services that were obtained, purchased, or rented during the year. Does not include diabetic supplies and insulin.
RX Prescription medication -- Prescribed medications obtained or purchased during the year.

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Table 3. Types of Medical Providers with IPUMS MEPS Abbreviations
Abbreviation Type of Medical Provider
P Physician
NPH Non-Physician
CHI Chiropractor
NP Nurse Practitioner
OPT Optometrist
PA Physician's Assistant
TH Occupational or Physical Therapist

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Expenditures vs. Charges

In contrast to expenditures, "charges" refer to the sum of all fully established charges for care received and usually do not reflect actual payments made for such services. The actual payments for service can be substantially lower than charges for service due to factors such as negotiated discounts, bad debt, and free care, including instances where care was covered under a flat fee arrangement and follow-up visits were provided without a separate charge (e.g., after a surgical procedure). Charges have become a less appropriate proxy for medical expenditures than in the past due to the increasingly common practice of discounting charges. Agency for Healthcare Research and Quality (AHRQ) staff advises analysts to use caution when working with the charge variables because they do not typically represent actual dollars exchanged for services or the resource costs of those services. In addition to the expenditure variables, a variable reflecting total charges is provided for each type of service category (except prescribed medicines).

Measurement of Expenditures

Expenditure data in MEPS are derived from the MEPS Household (HC) and Medical Provider (MPC) Components. Only HC data, that is, data collected using the household interview with respondents, were collected for non-physician visits, dental and vision services, other medical equipment and services, and home healthcare not provided by an agency. Data on expenditures for care provided by home health agencies were only collected in the MPC, which captures data from a sample of providers on dates of visits/services, use of medical care services, charges and sources of payments and amounts, and diagnoses and procedure codes for medical visits/encounters. Both HC and MPC data were collected for a sample of office-based visits to physicians (or medical providers supervised by physicians), hospital-based events (e.g., inpatient stays, emergency room visits, and outpatient department visits), and prescribed medicines. For these types of events, MPC data were used if complete; otherwise, HC data were used if complete. More information is available in the next section on data editing and imputation procedures.

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Editing and Imputation of Expenditure Information

Missing data for events where HC data were not complete and MPC data were not collected or complete were derived through an imputation process. A series of logical edits were applied to both the HC and MPC data to correct for several problems including, but not limited to, outliers, copayments or charges reported as total payments, and reimbursed amounts that were reported as out-of-pocket payments. In addition, edits were implemented to correct for misclassifications between Medicare and Medicaid and between Medicare HMOs and private HMOs as payment sources. Data were not edited to insure complete consistency between health insurance and source of payment variables on the file.

Expenditure data were imputed to 1) replace missing data, 2) provide estimates for care delivered under capitated reimbursement arrangements, and 3) to adjust household-reported insurance payments because respondents were often unaware that their insurer paid a discounted amount to the provider.

Replacing missing data

The predictive mean matching imputation method was employed in cases where expenditure data were imputed to replace missing data. This procedure uses regression models (based on events with completely reported expenditure data) to predict total expenses for each event. Then, for each event with missing payment information, a donor event with the closest predicted payment with the same pattern of expected payment sources as the even with missing payment was used to impute the missing payment value.

Adjusting for care delivered under capitated reimbursement arrangements

Because payments for medical care provided under capitated reimbursement arrangements and through public clinics and Veterans' Hospitals are not tied to particular medical events, expenditures for events covered under those types of arrangements and settings were also imputed. Using a weighted sequential hot-deck procedure, events covered under capitated arrangements were imputed from events covered under managed care arrangements that were paid based on a discounted fee-for-service method, while imputations for visits to public clinics and Veterans' Hospitals were based on similar events that were paid on a fee-for-service basis. As for other events, selected predictor variables were used to form groups of donor and recipient events for the imputations.

Adjustments to household-reported payments to reflect insurer discounts

An adjustment was also applied to some HC-reported expenditure data because an evaluation of matched HC/MPC data showed that respondents who reported that charges and payments were equal were often unaware that insurance payments for the care had been based on a discounted charge. To compensate for this systematic reporting error, a weighted sequential hot-deck imputation procedure was implemented to determine an adjustment factor for HC-reported insurance payments when charges and payments were reported to be equal. As for the other imputations, selected predictor variables were used to form groups of donor and recipient events for the imputation process.

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Special cases

Flat fees

Most of the expenditures for medical care reported by MEPS participants are associated with single medical events. However, in some situations there is one charge that covers multiple contacts between a medical provider and patient (e.g., obstetrician services, orthodontia). In these situations (generally called flat or global fees), total payments for the flat or global fee were included if the initial service was provided in the reference year. For example, all payments for an orthodontist's fee that covered multiple visits over three years were included if the initial visit occurred in 2014 for the case that the reference year is 2014. However, if a visit in 2014 to an orthodontist was part of a flat fee in which the initial visit occurred in 2013, then none of the payments for the flat fee were included. The approach used to count expenditures for flat fees may create what appear to be inconsistencies between utilization and expenditure variables. For example, if several visits under a flat fee arrangement occurred in 2014 but the first visit occurred in 2013, then none of the expenditures were included, resulting in low expenditures relative to utilization for that person. Conversely, the flat fee methodology may result in high expenditures for some persons relative to their utilization. For example, all of the expenditures for an expensive flat fee were included even if only the first visit covered by the fee had occurred in 2014. On average, the methodology used for flat fees should result in a balance between overestimation and underestimation of expenditures in a particular year.

Zero expenditures

There are some medical events reported by respondents where the payments were zero. This could occur for several reasons including (1) free care was provided, (2) bad debt was incurred, (3) care was covered under a flat fee arrangement beginning in an earlier year, or (4) follow-up visits were provided without a separate charge (e.g., after a surgical procedure). In summary, these types of events have no impact on the person-level expenditure variables.

Emergency room visits followed by a hospitalization

Hospitals usually include expenses associated with emergency room visits that immediately result in an inpatient stay with the charges and payments for the inpatient stay. Therefore, to avoid the potential for double counting when imputing missing expenses, separately reported facility expenditures for emergency room visits that were identified in the MPC as directly linked to an inpatient stay were included as part of the inpatient stay only. This strategy to avoid double counting resulted in $0 facility expenditures for these emergency room visits (but there still may be associated separately-billed doctor expenses). However, these $0 emergency room visits are still counted as separate visits in the utilization variable ERTOTVIS.

Hospital stays for delivery of a newborn

Data used to construct the inpatient utilization and expenditure variables for newborns were edited to exclude stays where the newborn left the hospital on the same day as the mother. This edit was applied because discharges for infants without complications after birth were not consistently reported in the survey, and charges for newborns without complications are typically included in the mother's hospital bill. However, if the newborn was discharged at a later date than the mother was discharged, then the discharge was considered a separate stay for the newborn when constructing the utilization and expenditure variables.

Prescription medications

Information about prescription medications was collected on the HC, the Pharmacy Component (PC), and since 2007, the MarketScan Outpatient Pharmaceutical Claims database. For more information about these additional data collection efforts, please refer to the user note on Collection of Information about Prescription Medications. The total expenditure variable for prescription medications sums all amounts paid out-of-pocket and by third party payers for each prescription purchased during the year. No variables reflecting charges for prescription medications are included because a large proportion of respondents to the MEPS pharmacy component survey did not provide charge data. During the HC, respondents were asked if they send in claim forms for their prescriptions (self-filers) or if their pharmacy providers do this automatically for them at the point of purchase (non-self-filers). For non-self-filers, charge and payment information was collected in the pharmacy component survey, unless the purchase was an insulin or diabetic supply/equipment event. However, charge and payment information was collected for self-filers in the household questionnaire, because payments by private third party payers for self-filers' purchases would not be available from the pharmacy component. Uninsured persons were treated as those whose pharmacies filed their prescription claims at the point of purchase. Persons who said they did not know if they sent in their own prescription claim forms were treated as those who did send in their own prescription claim forms.

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