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Accounting for Future Costs in Medical Cost-Effectiveness Analysis

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  • David Meltzer
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    Abstract

    Most medical cost-effectiveness analyses include future costs only for related illnesses but this approach is controversial. This paper demonstrates that cost-effectiveness analysis is consistent with lifetime utility maximization only if it includes all future medical and non-medical expenditures. Estimates of the magnitude of these future costs suggest that they may substantially alter both the absolute and relative cost-effectiveness of medical interventions intervention increases length of life more than quality of life. In older populations, current methods overstate the cost-effectiveness of interventions which extend life compared to" interventions which improve the quality of life.

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    File URL: http://www.nber.org/papers/w5946.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5946.

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    Date of creation: Feb 1997
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    Publication status: published as Journal of Health Economics, Vol.16, no.1 (1997): 33-64.
    Handle: RePEc:nbr:nberwo:5946

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    1. Prescott, Edward C & Townsend, Robert M, 1984. "General Competitive Analysis in an Economy with Private Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 1-20, February.
    2. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    3. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    4. Alan M. Garber & Charles E. Phelps, 1992. "Economic Foundations of Cost Effective Analysis," NBER Working Papers 4164, National Bureau of Economic Research, Inc.
    5. Loomes, Graham & McKenzie, Lynda, 1989. "The use of QALYs in health care decision making," Social Science & Medicine, Elsevier, vol. 28(4), pages 299-308, January.
    6. Wagstaff, Adam, 1991. "QALYs and the equity-efficiency trade-off," Journal of Health Economics, Elsevier, vol. 10(1), pages 21-41, May.
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