A risk adjustment approach to estimating the burden of skin disease in the United States

Direct insurance claims tabulation and risk adjustment statistical methods can be used to estimate health care costs associated with various diseases. In this third manuscript derived from the new national Burden of Skin Disease Report from the American Academy of Dermatology, a risk adjustment method that was based on modeling the average annual costs of individuals with or without specific diseases, and specifically tailored for 24 skin disease categories, was used to estimate the economic burden of skin disease. The results were compared with the claims tabulation method used in the first 2 parts of this project. The risk adjustment method estimated the direct health care costs of skin diseases to be $46 billion in 2013, approximately $15 billion less than estimates using claims tabulation. For individual skin diseases, the risk adjustment cost estimates ranged from 11% to 297% of those obtained using claims tabulation for the 10 most costly skin disease categories. Although either method may be used for purposes of estimating the costs of skin disease, the choice of method will affect the end result. These findings serve as an important reference for future discussions about the method chosen in health care payment models to estimate both the cost of skin disease and the potential cost impact of care changes.