Practical approach for using Medicare data to estimate costs for cost–effectiveness analysis

Many methods have been used to measure costs for cost-effectiveness analysis in healthcare. A central challenge in cost estimation is determining the direct cost of medical goods and services from a societal perspective. This review applies the methodology for calculating Medicare reimbursements for physician services, hospital services and medications as a means of estimating healthcare costs from a US societal perspective. This review provides the tools and information needed to calculate direct medical costs related to in- and outpatient services provided by physicians and hospitals, as well as drug costs using Medicare reimbursement data. The data used in calculating Medicare reimbursements was obtained from the Centers for Medicare and Medicaid Services website. Methods for estimating costs for a particular service in a specific location using Medicare and Medicaid Services are described and demonstrated. A method based on Medicare data that uses the unadjusted geographic practice cost index and standard hospital base rate to estimate healthcare costs that can be generalized to the US population is described and demonstrated. This review provides cost-effectiveness analysts with the tools needed to calculate healthcare service costs for economic research. It contains links to all websites needed for obtaining Medicare and Medicaid Services data and provides a step-by-step analysis of the methodology involved in calculating costs. A practical guide for applying the methodology used by Medicare and Medicaid Services to calculate direct medical costs in order to estimate US societal costs in cost-effectiveness analysis is provided.