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Indirect Costs and Discounting in Health Care Decision-Making: The Role of Distortionary Taxation

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Author Info
Liqun Liu (Texas A&M University)
Andrew Rettenmaier (Texas A&M University)
Thomas Saving (Texas A&M University)
Abstract

Two important unresolved issues in the evaluation of health care programs are the treatment of indirect costs and the selection of the appropriate discount rate. This paper emphasizes the role of distortionary taxation in addressing these issues. It establishes that: (i) indirect government-paid costs should be treated differently from indirect privately-paid costs; (ii) direct and indirect government costs of a health program should be discounted by the gross rate of return, while consumers' monetary valuations of the program's effects, less direct private costs, should be discounted at the net rate of return; and (iii) the present value of total government costs should be multiplied by a marginal cost of funds before it is comparable to the present value of net private benefits.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Contributions to Economic Analysis & Policy.

Volume (Year): 5 (2006)
Issue (Month): 1 ()
Pages: 1512-1512
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Related research
Keywords: health care costs discounting cost benefit analysis marginal cost of funds

Find related papers by JEL classification:
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
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    Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Liqun Liu & Andrew J. Rettenmaier & Thomas R. Saving, 2008. "Longevity bias in cost-effectiveness analysis," Health Economics, John Wiley & Sons, Ltd., vol. 17(4), pages 523-534. [Downloadable!]
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