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Use of Econometric Models to Estimate Expenditure Shares

Objective. To investigate the use of regression models to calculate disease-specific shares of medical expenditures.

Data Sources/Study Setting. Medical Expenditure Panel Survey (MEPS), 2000–2003.

Study Design. Theoretical investigation and secondary data analysis.

Data Collection/Extraction Methods. Condition files used to define the presence of 10 medical conditions.

Principal Findings. Incremental effects of conditions on expenditures, expressed as a fraction of total expenditures, cannot generally be interpreted as shares. When the presence of one condition increases treatment costs for another condition, summing condition-specific shares leads to double-counting of expenditures.

Conclusions. Condition-specific shares generated from multiplicative models should not be summed. We provide an algorithm that allows estimates based on these models to be interpreted as shares and summed across conditions.

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