On the Time Series Properties of Medical Net Discount Rates

Sen Amit and Gelles Gregory
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Sen Amit: Xavier University
Gelles Gregory: University of Missouri - Rolla

Journal of Business Valuation and Economic Loss Analysis, 2006, vol. 1, issue 1, 13

Abstract: We examine the time series properties of medical net discount rates based on five different medical consumer price indices, namely, medical care, medical services, medical care commodities, physician's services, and prescription drugs & medical supplies that were first analyzed by Ewing, Piette, and Payne (2003). Unlike Ewing, Piette, and Payne (2003), we test for the presence of a unit root in these series using statistics that allow for a break in the trend function at an unknown date, and find that all series are tend-break stationary. Therefore, practitioners should use medical net discount rate forecasts based on the estimated trend function in the post-break periods to calculate the present value of future medical costs.

Keywords: medical net discount rate; unit root; trend-break; break-date (search for similar items in EconPapers)
Date: 2006
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DOI: 10.2202/1932-9156.1003

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