Attribution of Health Care Costs to Diseases: Does the Method Matter?

Cost of illness (COI) studies focus on allocating health expenditures to a comprehensive set of diseases. A variety of techniques have been used to allocate spending to diseases. In this paper, we compare spending attributed to diseases using three approaches: one based on the principal diagnosis listed on each encounter’s claim, a second based on all diagnoses listed on the encounter, and a third based on decomposing a person’s total annual spending to their conditions. The study sample is large: 2.3 million commercially insured individuals under age 65. Results indicate significant differences in the allocations from the different approaches. The two claims-based encounter approaches allocate 78% of overall spending to diseases, while the person approach allocates 95% of spending to diseases. The large unallocated spending in the claims-based approach is due largely to lack of diagnosis codes for prescription medications. Spending was concentrated in a small number of conditions; the 10 most expensive diseases account for 40% of total spending with the person approach and about 18% of spending with the primary-diagnosis and all-diagnoses encounter approaches. Future research needs to pay careful attention to the choice of method in allocating spending to diseases, especially when research uses prescription medication claims data.