Models For Health Care

This chapter reviews the econometric methods that are used by health economists to model health care costs. These methods are used for prediction, projection and forecasting, in the context of risk adjustment, resource allocation, technology assessment and policy evaluation. The chapter reviews the literature on the comparative performance of the methods, especially in the context of forecasting individual health care costs, and concludes with an empirical case study. Acknowledgements: I gratefully acknowledge funding from the Economic and Social Research Council (ESRC) under the Large Grant Scheme, reference RES-06025-0045. I am especially grateful to Will Manning for his detailed reading and extensive comments and for advice and access to Stata code from Anirban Basu, Partha Deb, Donna Gilleskie, Edward Norton and Nigel Rice.