Table 6. Explanatory Power of Alternative Prospective Models, Model Development Sample*.
| Model or Factor | R2 | Comments |
|---|---|---|
|
| ||
| Percent | ||
| Base Case | ||
| HCC Model | 8.62 | Base case for comparison |
| Sub-Samples | ||
| Separate Models for Aged and Disabled | 8.69 | With few exceptions, parameter estimates are not substantially different. Substance abuse and mental health expenditures are higher for the disabled. |
| Risk Adjusters Added Individually to HCC Model | ||
| Medicaid Eligibility | 8.71 | Coefficient = $958, Standard Error = $39. Eligibility rules vary by State. |
| Linear Age Plus Sex Dummy (Replaces 12 Age and Sex Cells) | 8.62 | Negligible gain for either aged or disabled subsamples. |
| 1991 Expenditures | 9.79 | Coefficient = $0.21, Standard Error < $0.01. |
| Cancer, Heart Disease, Stroke, Diabetes, COPD Interactions | 8.64 | COPD is chronic obstructive pulmonary disease. |
| Alternative Risk Adjusters | ||
| Cancer, Heart Disease, and Stroke Plus Age and Sex | 3.82 | — |
| Cancer, Heart Disease, Stroke, Diabetes, COPD Plus Age and Sex | 4.93 | — |
| Cancer, Heart Disease, Stroke, Diabetes, COPD Plus Interactions and Age and Sex | 5.02 | — |
| 1991 Expenditures Plus Age and Sex | 7.04 | Coefficient = $0.38, Standard Error < $0.01. |
| 1991 Hospitalization Dummy Plus Age and Sex | 3.94 | PIPDCG model R2 = 5.88 Percent |
| Transformed Dependent Variable Expenditures Deflated by Geographic Input Price Index (G1PI) | 8.88 | GIPI measures area variation in wages and other prices. |
| Top-Coded at $50,000 | 13.93 | Simulates outlier pool with $50,000 threshold. |
| Top-Coded at $25,000 | 14.83 | Simulates outlier pool with $25,000 threshold. |
| Logged (1 + $) | 18.75 | Medical expenditures are highly skewed. |
| Continuous Update Model | ||
| HCC Model | 24.08 | One month's expenditures are predicted using the preceding 12 months' diagnoses. |
*
Because these R2s are computed on the model development sample, they are not directly comparable to the R2s in Table 3 computed on the validation sample. For example, the HCC model has an R2 of 8.62 percent on the model development sample and an R2 of 8.08 percent on the validation sample. In general, the validation sample R2s will be lower.
SOURCE: 1991 and 1992 Medicare claims.