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Discounting and decision making in the economic evaluation of health‐care technologies

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Author Info

  • Karl Claxton
  • Mike Paulden
  • Hugh Gravelle
  • Werner Brouwer
  • Anthony J. Culyer

Abstract

Discounting costs and health benefits in cost-effectiveness analysis has been the subject of recent debate – some authors suggesting a common rate for both and others suggesting a lower rate for health. We show how these views turn on key judgments of fact and value: on whether the social objective is to maximise discounted health outcomes or the present consumption value of health; on whether the budget for health care is fixed; on the expected growth in the cost‐effectiveness threshold; and on the expected growth in the consumption value of health. We demonstrate that if the budget for health care is fixed and decisions are based on incremental cost effectiveness ratios (ICERs), discounting costs and health gains at the same rate is correct only if the threshold remains constant. Expecting growth in the consumption value of health does not itself justify differential rates but implies a lower rate for both. However, whether one believes that the objective should be the maximisation of the present value of health or the present consumption value of health, adopting the social time preference rate for consumption as the discount rate for costs and health gains is valid only under strong and implausible assumptions about values and facts. Copyright (C) 2010 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1612
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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: 2-15

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Handle: RePEc:wly:hlthec:v:20:y:2011:i:1:p:2-15

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

Related research

Keywords: economic evaluation ; discounting ; cost effectiveness analysis ;

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Cited by:
  1. James K. Hammitt, 2012. "Discounting Health And Cost‐Effectiveness Analysis: A Response To Nord," Health Economics, John Wiley & Sons, Ltd., vol. 21(7), pages 878-882, 07.
  2. Karl Claxton & Simon Walker & Steven Palmer & Mark Sculpher, 2010. "Appropriate Perspectives for Health Care Decisions," Working Papers 054cherp, Centre for Health Economics, University of York.
  3. Mike Paulden & Anthony J. Culyer, 2010. "Does Cost-Effectiveness Analysis Discriminate against Patients with Short Life Expectancy?," Working Paper Series 41_10, The Rimini Centre for Economic Analysis.
  4. Mareike Schad & Jürgen John, 2012. "Towards a social discount rate for the economic evaluation of health technologies in Germany: an exploratory analysis," The European Journal of Health Economics, Springer, vol. 13(2), pages 127-144, April.
  5. Mike Paulden & Anthony J Culyer, 2010. "Does cost-effectiveness analysis discriminate against patients with short life expectancy? Matters of logic and matters of context," Working Papers 055cherp, Centre for Health Economics, University of York.
  6. Michael Spackman, 2011. "Government discounting controversies: changing prices, opportunity costs and systematic risk," Grantham Research Institute on Climate Change and the Environment Working Papers 67, Grantham Research Institute on Climate Change and the Environment.

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