EXPit	is the projected level of health expenditure of type “i” in year “t” (for example, the level of expenditures for physicians' services in 1985, the first year of projected values).
EXPit-1	is the level of health expenditure for type “i” for year “t-1.” This is an historical value for calendar year 1984 and a projected value thereafter. Historical expenditures are from the Health Care Financing Administration (Levit et al., 1985).
%CH(POPt)	is the projected annual percent change, divided by 100, of total population for year “t” compared to year “t-1.” For example, population was projected to grow from 245,226 (in thousands) in 1984 to 247,424 in 1985, an increase of 0.90 percent (247,424/245,226= 1.009). POP1985 is .009 and the first term in parentheses of the five-factor equation for E1985 is 1.009.
Shifts in the demographic mix (for example, toward more aged persons) that affect utilization growth rates are factored into the next variable, growth in use per capita.
$\%\mathit{\text{CH}}{\left(\frac{\mathit{\text{UTIL}}}{\mathit{\text{POP}}}\right)}_{\mathit{\text{it}}}$	is the projected annual percent change, divided by 100, of per capita use of medical service type “i” in year “t,” where use is measured by patient visits per capita, patient days per capita, or some similar measure.
%CH(PGNPt)	is the projected annual percent change, divided by 100, of the implicit price deflator for GNP for year “t.” Growth in the GNP deflator reflects economy-wide cost pressures that are external to the health care industry.
$\%\mathit{\text{CH}}{\left(\frac{\mathit{\text{MEDPRICE}}}{\mathit{\text{PGNP}}}\right)}_{\mathit{\text{it}}}$	is the projected annual percent change, divided by 100, of medical care price for service type “i” in year “t” deflated by the implicit price deflator for GNP for year “t.” This measures change in medical care prices relative to overall prices in the economy. It captures the implicit underlying interplay of (1) demand-pull inflationary forces (such as changes in deductibles and coinsurance), (2) cost pressures specific to the industry, (3) supply-side pricing behavior, (4) supply-side productivity behavior, and so on.
%CH (RESIDUALit)	is the projected annual percent change, divided by 100, of the residual category for service type “i” for year “t.” This factor can be interpreted as the percent changes in real expenditures per unit of service, such as per physician visit or per hospital day. This factor includes changes in the number of diagnostic and therapeutic procedures provided per visit or inpatient day, changes in the mix of services, and changes in regulations that impact on the quantity and quality of resources used to produce a visit or patient day. Like all residuals, it is an amalgamation of effects that cannot be individually measured or differentiated. Because the measures of price used are imperfect, this category should be interpreted with caution. For example, errors in the price change variable get translated into compensating errors in the movement of the residual category.