Modelling well being care price is usually problematic as a result of are distributed in a non-normal method. Sometimes, there are numerous $0 observations (i.e., people who don’t use any well being care) and price distribution that’s strongly proper skewed amongst well being care customers due a disproportionate variety of people with very excessive well being care prices. This remark is well-known by well being economists however a complicating issue for modelers is mapping illness price to particular well being care states. For example, whereas the price of most cancers care might fluctuate based mostly on illness stage and whether or not the most cancers has progressed; the price of heart problems will differ if the affected person has a myocardial infarction.

A paper by Zhou et al. (2023) offers a pleasant tutorial on the right way to estimate prices with illness mannequin states utilizing generalized linear fashions. The tutorial incorporates for fundamental steps.

Step 1: Making ready the dataset:

• The dataset usually requires calculating price for discrete time durations. For example, when you’ve got claims information, you could have data on price by date, however for analytic functions might wish to have a dataset with price data by particular person (rows) with the columns being the associated fee by 12 months (or month). Alternatively, you possibly can create the unit of remark to be the person-year (or person-month) and every row can be a separate person-year file.
• Subsequent, one should specify the illness states. In every time interval, the particular person is assigned to a illness state. Challenges embrace figuring out how granular to make the states (e.g. simply MI vs timing since MI) and the right way to deal with multi-state eventualities.
• When information are censored one can (i) add a covariate to point information are censored or (ii) exclude observations with partial information. If price information are lacking (however the affected person will not be in any other case censored), a number of imputation strategies could also be used. Forming the time durations of research requires mapping to the choice mannequin’s cycle size, dealing with censoring appropriately, and doubtlessly remodeling information.
• A pattern information set is proven beneath.

Step 2: Mannequin choice:

• The paper recommends utilizing a two-part mannequin with a generalized linear mannequin (GLM) framework, since OLS assumptions round normality and homoscedasticity within the residuals are sometimes violated.
• With the GLM, the anticipated worth of price is remodeled non-linearly, as proven within the components beneath. You might be required to estimate each a hyperlink perform and the distribution of the error time period. “The preferred ones (combos of hyperlink perform and distribution) for healthcare prices are linear regression (id hyperlink with Gaussian distribution) and Gamma regression with a pure logarithm hyperlink.)

• To mix the GLM with a two-part mannequin, one merely estimate the equation above on all constructive values after which calculates a logit or probit mannequin for the chance a person has constructive price.

Step 3: Choosing the ultimate mannequin.

• Mannequin choice first should think about which covariates are included within the regression which might be obtained by stepwise choice utilizing a pre-specified statistical significance. Nonetheless this may end up in over becoming. Various covariate choice methods embrace bootstrapping stepwise choice and penalized methods (e.g. least angle choice and shrinkage operator, LASSO). Interactions between covariates is also thought-about.
• General match might be evaluated utilizing the imply error, imply absolute error and root imply squared error (the final is mostly used). Higher becoming fashions have smaller errors.

Step 4: Mannequin prediction

• Whereas predicted price are simple to do, the affect of illness state on price is extra advanced. The authors advocate the next:

For a one-part non-linear mannequin or a two-part mannequin, marginal results might be derived utilizing recycled prediction. It contains the next two steps: (1) run two eventualities throughout the goal inhabitants by setting the illness state of curiosity to be (a) current (e.g. recurrent most cancers) or (b) absent (e.g. no most cancers recurrence); (2) calculate the distinction in imply prices between the 2 eventualities. Commonplace errors of the imply distinction might be estimated utilizing bootstrapping.

The authors additionally present an illustrative instance making use of this method to modeling hospital price related to cardiovascular occasions within the UK. The authors additionally present the pattern code in R as effectively and you’ll obtain that right here.