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Discounting future health benefits: the poverty of consistency arguments

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  • Erik Nord
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    Abstract

    In economic evaluation of health care, main stream practice is to discount benefits at the same rate as costs. But main papers in which this practice is advocated have missed a distinction between two quite different evaluation problems: (1) How much does the time of program occurrence matter for value and (2) how much do delays in health benefits from programs implemented at a given time matter? The papers have furthermore focused on logical and arithmetic arguments rather than on real value considerations. These ‘consistency arguments’ are at best trivial, at worst logically flawed. At the end of the day, there is a sensible argument for equal discounting of costs and benefits rooted in microeconomic theory of rational, utility maximising consumers' saving behaviour. But even this argument is problematic, first because the model is not clearly supported by empirical observations of individuals' time preferences for health, second because it relates only to evaluation in terms of overall individual utility. It does not provide grounds for claiming that decision makers with a wider societal perspective, which may include concerns for fair distribution, need to discount health benefits and costs equally. This applies even if health benefits are measured in monetary terms. Copyright (C) 2010 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/hec.1687
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 20 (2011)
    Issue (Month): 1 (January)
    Pages: 16-26

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    Handle: RePEc:wly:hlthec:v:20:y:2011:i:1:p:16-26

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    Keywords: time preference ; discounting ; health benefits ; consistency argument ; Keeler–Cretin paradox ;

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    Cited by:
    1. Erik Nord & Jose Luis Pinto & Jeff Richardson & Paul Menzel & Peter Ubel, 1999. "Incorporating societal concerns for fairness in numerical valuations of health programmes," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(1), pages 25-39.

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