Three-Way Decomposition for Applied Health Equity Research: A Practical Tutorial to Understand and Address Inequalities

Mediation analysis is essential for understanding causal mechanisms and designing effective policy interventions. This paper explains a comprehensive framework for implementing VanderWeele’s (2009) three-way decomposition using natural effect models (NEM), focusing on its application in health equity research. While three-way decomposition helps social epidemiologists understand how social exposures influence health outcomes through differential mediator effects, its implementation through NEM has not been fully utilized. Using the R package medflex to implement NEM, we demonstrate the methodology through two case analyses: healthcare expenditure disparities between Medicaid beneficiaries and health insurance enrollees using continuous outcomes, and racial/ethnic disparities in preterm birth using binary outcomes. We provide detailed interpretations of NEM estimates in terms of three-way decomposition and discuss methodological considerations for researchers designing health policies to reduce disparities.