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Production gains from health care: what should be included in cost-effectiveness analyses?

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  • Olsen, Jan Abel
  • Richardson, Jeff

Abstract

Recent literature has been concerned with the correct measurement of the 'indirect costs and benefits' of health care as well as the issue of including these items in economic evaluations. This article considers the question of which 'indirect benefits' to include in cost effectiveness analysis and cost utility analysis. Within the context of a collectively financed health scheme the relevant issues include not only the size of the net resource costs of providing health care but also which costs and benefits the society is prepared to consider in its assessment of health services. The strong preference for 'equal access for equal need' implies that some production gains may have to be disregarded in the social welfare function. We introduce the notion of socially relevant and socially irrelevant production gains. The analysis suggests that the magnitude of the socially relevant part of the production gains may vary between countries as it depends, first, upon differences in patients' potential contributions to the rest of society (tax rates), and second, the strength of preferences for equity.

Suggested Citation

  • Olsen, Jan Abel & Richardson, Jeff, 1999. "Production gains from health care: what should be included in cost-effectiveness analyses?," Social Science & Medicine, Elsevier, vol. 49(1), pages 17-26, July.
  • Handle: RePEc:eee:socmed:v:49:y:1999:i:1:p:17-26
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    Citations

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    Cited by:

    1. Pieter H. M. van Baal & Talitha L. Feenstra & Rudolf T. Hoogenveen & G. Ardine de Wit & Werner B. F. Brouwer, 2007. "Unrelated medical care in life years gained and the cost utility of primary prevention: in search of a 'perfect' cost-utility ratio," Health Economics, John Wiley & Sons, Ltd., vol. 16(4), pages 421-433.
    2. Jeffrey R. J. Richardson & Jan Abel Olsen, 2006. "In defence of societal sovereignty: a comment on Nyman 'the inclusion of survivor consumption in CUA'," Health Economics, John Wiley & Sons, Ltd., vol. 15(3), pages 311-313.
    3. Marieke Krol & Jocé Papenburg & Siok Swan Tan & Werner Brouwer & Leona Hakkaart, 2016. "A noticeable difference? Productivity costs related to paid and unpaid work in economic evaluations on expensive drugs," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(4), pages 391-402, May.
    4. Aidan R. Vining & David L. Weimer, 2013. "An assessment of important issues concerning the application of benefit–cost analysis to social policy," Chapters,in: Principles and Standards for Benefit–Cost Analysis, chapter 1, pages 25-62 Edward Elgar Publishing.
    5. Jesse Kigozi & Sue Jowett & Martyn Lewis & Pelham Barton & Joanna Coast, 2016. "Estimating productivity costs using the friction cost approach in practice: a systematic review," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(1), pages 31-44, January.
    6. Jesse Kigozi & Sue Jowett & Martyn Lewis & Pelham Barton & Joanna Coast, 2016. "Estimating productivity costs using the friction cost approach in practice: a systematic review," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(1), pages 31-44, January.
    7. Jeff Richardson & Stuart Peacock & Angelo Iezzi, 2009. "Do quality-adjusted life years take account of lost income? Evidence from an Australian survey," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 10(1), pages 103-109, February.
    8. Aakvik, Arild & Holmås, Tor Helge & Kjerstad, Egil, 2015. "Prioritization and the elusive effect on welfare – A Norwegian health care reform revisited," Social Science & Medicine, Elsevier, vol. 128(C), pages 290-300.
    9. Carmen Herrero Blanco & Juan D. Moreno Ternero, 2004. "Generalized Cost-Analysis Of Screening Programs," Working Papers. Serie AD 2004-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    10. Carmen Herrero & Juan D. Moreno-Ternero, 2009. "Estimating production costs in the economic evaluation of health-care programs," Health Economics, John Wiley & Sons, Ltd., vol. 18(1), pages 21-35.
    11. Brouwer, Werner B.F. & Culyer, Anthony J. & van Exel, N. Job A. & Rutten, Frans F.H., 2008. "Welfarism vs. extra-welfarism," Journal of Health Economics, Elsevier, vol. 27(2), pages 325-338, March.
    12. Krol, Marieke & Brouwer, Werner B.F. & Severens, Johan L. & Kaper, Janneke & Evers, Silvia M.A.A., 2012. "Productivity cost calculations in health economic evaluations: Correcting for compensation mechanisms and multiplier effects," Social Science & Medicine, Elsevier, vol. 75(11), pages 1981-1988.
    13. Richardson, Jeff & McKie, John, 2007. "Economic evaluation of services for a National Health Scheme: The case for a fairness-based framework," Journal of Health Economics, Elsevier, vol. 26(4), pages 785-799, July.
    14. Hansen, Bodil O. & keiding, Hans, 1999. "Production Gains In Cost-Effective- Ness Analyses - A Welfare-Theoreti- Cal Approach," Working Papers 09-1999, Copenhagen Business School, Department of Economics.

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