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Future costs in cost effectiveness analysis

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  • Lee, Robert H.

Abstract

This paper resolves several controversies in CEA. Generalizing [Garber, A.M., Phelps, C.E., 1997. Economic foundations of cost-effectiveness analysis. Journal of Health Economics 16 (1), 1-31], the paper shows accounting for unrelated future costs distorts decision making. After replicating [Meltzer, D., 1997. Accounting for future costs in medical cost-effectiveness analysis. Journal of Health Economics 16 (1), 33-64] quite different conclusion that unrelated future costs should be included in CEA, the paper shows that Meltzer's findings result from modeling the budget constraint as an annuity, which is problematic. The paper also shows that related costs should be included in CEA. This holds for a variety of models, including a health maximization model. CEA should treat costs in the manner recommended by Garber and Phelps.

Suggested Citation

  • Lee, Robert H., 2008. "Future costs in cost effectiveness analysis," Journal of Health Economics, Elsevier, vol. 27(4), pages 809-818, July.
    • Handle: RePEc:eee:jhecon:v:27:y:2008:i:4:p:809-818
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    References listed on IDEAS

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    1. Blomqvist, Ake, 2002. "Defining the value of a statistical life: a comment," Journal of Health Economics, Elsevier, vol. 21(1), pages 169-175, January.
    2. David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc.
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    6. Garber, Alan M. & Phelps, Charles E., 1997. "Economic foundations of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 1-31, February.
    7. Barro, Robert J & Friedman, James W, 1977. "On Uncertain Lifetimes," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 843-849, August.
    8. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
    9. Johansson, Per-Olov, 2001. "Is there a meaningful definition of the value of a statistical life?," Journal of Health Economics, Elsevier, vol. 20(1), pages 131-139, January.
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    Cited by:

    1. Mueller-Langer, Frank & Fecher, Benedikt & Harhoff, Dietmar & Wagner, Gert G., 2019. "Replication studies in economics—How many and which papers are chosen for replication, and why?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 48(1), pages 62-83.
    2. Pieter H. M. van Baal & Talitha L. Feenstra & Johan J. Polder & Rudolf T. Hoogenveen & Werner B. F. Brouwer, 2011. "Economic evaluation and the postponement of health care costs," Health Economics, John Wiley & Sons, Ltd., vol. 20(4), pages 432-445, April.
    3. David Meltzer, 2012. "Future Costs in Medical Cost-effectiveness Analysis," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 45, Edward Elgar Publishing.
    4. Pieter van Baal & David Meltzer & Werner Brouwer, 2016. "Future Costs, Fixed Healthcare Budgets, and the Decision Rules of Cost‐Effectiveness Analysis," Health Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 237-248, February.
    5. Amitabh Chandra & Jonathan Skinner, 2012. "Technology Growth and Expenditure Growth in Health Care," Journal of Economic Literature, American Economic Association, vol. 50(3), pages 645-680, September.
    6. Kellerborg, Klas & Wouterse, Bram & Brouwer, Werner & van Baal, Pieter, 2021. "Estimating the costs of non-medical consumption in life-years gained for economic evaluations," Social Science & Medicine, Elsevier, vol. 289(C).
    7. Alec Morton & Amanda I. Adler & David Bell & Andrew Briggs & Werner Brouwer & Karl Claxton & Neil Craig & Alastair Fischer & Peter McGregor & Pieter van Baal, 2016. "Unrelated Future Costs and Unrelated Future Benefits: Reflections on NICE Guide to the Methods of Technology Appraisal," Health Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 933-938, August.
    8. Amitabh Chandra & Jonathan S. Skinner, 2011. "Technology Growth and Expenditure Growth in Health Care," NBER Working Papers 16953, National Bureau of Economic Research, Inc.
    9. Bengt Liljas, 2010. "On the welfare theoretic foundation of cost-effectiveness analysis—the case when survival is not affected," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(1), pages 5-13, February.
    10. Daniel Grima & Lisa Bernard & Elizabeth Dunn & Philip McFarlane & David Mendelssohn, 2012. "Cost-Effectiveness Analysis of Therapies for Chronic Kidney Disease Patients on Dialysis," PharmacoEconomics, Springer, vol. 30(11), pages 981-989, November.
    11. An Creemers & Marc Aerts & Niel Hens & Ziv Shkedy & Frank De Smet & Philippe Beutels, 2011. "Revealing age-specific past and future unrelated costs of pneumococcal infections by flexible generalized estimating equations," Journal of Applied Statistics, Taylor & Francis Journals, vol. 38(8), pages 1533-1547, August.

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