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Discounting in economic evaluation of healthcare interventions: what about the risk term?

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  • Lars Hultkrantz

    (Örebro University)

Abstract

Results from economic evaluations of long-term outcomes are strongly dependent on the chosen discount rate. A recent review of national guidelines for evaluation of healthcare interventions finds that “the level of currently used discount rates seems relatively high in many countries”. However, this conclusion comes from a comparison to rates derived or observed for investments in safe assets, while rate of return requirements are typically considerably higher when investment involves risk. This paper reviews recent literature on how to account for project-specific risk in determination of the social rate of discount and discusses implications for economic evaluation of healthcare interventions. It concludes that the available empirical evidence strongly suggests that the demand for and consumer value of health and healthcare is co-variant with income, which therefore implies that there is a non-diversifiable risk component of health-related investment.

Suggested Citation

  • Lars Hultkrantz, 2021. "Discounting in economic evaluation of healthcare interventions: what about the risk term?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(3), pages 357-363, April.
    • Handle: RePEc:spr:eujhec:v:22:y:2021:i:3:d:10.1007_s10198-020-01257-x
    DOI: 10.1007/s10198-020-01257-x
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    More about this item

    Keywords

    Cost–benefit analysis; Social discount rate; Project risk;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • I10 - Health, Education, and Welfare - - Health - - - General

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