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Empirical Estimates of the Marginal Cost of Health Produced by a Healthcare System: Methodological Considerations from Country-Level Estimates


  • Laura C. Edney

    (Flinders University)

  • James Lomas

    (University of York)

  • Jonathan Karnon

    (Flinders University)

  • Laura Vallejo-Torres

    (University of Las Palmas de Gran Canaria)

  • Niek Stadhouders

    (Radboud University and Medical Center)

  • Jonathan Siverskog

    (Linköping University)

  • Mike Paulden

    (University of Alberta)

  • Ijeoma P. Edoka

    (University of the Witwatersrand
    University of the Witwatersrand)

  • Jessica Ochalek

    (University of York)


Many health technology assessment committees have an explicit or implicit reference value (often referred to as a ‘threshold’) below which new health technologies or interventions are considered value for money. The basis for these reference values is unclear but one argument is that it should be based on the health opportunity costs of funding decisions. Empirical estimates of the marginal cost per unit of health produced by a healthcare system have been proposed to capture the health opportunity costs of new funding decisions. Based on a systematic search, we identified eight studies that have sought to estimate a reference value through empirical estimation of the marginal cost per unit of health produced by a healthcare system for England, Spain, Australia, The Netherlands, Sweden, South Africa and China. We review these eight studies to provide an overview of the key methodological approaches taken to estimate the marginal cost per unit of health produced by the healthcare system with the aim to help inform future estimates for additional countries. The lead author for each of these papers was invited to contribute to the current paper to ensure all the key methodological issues encountered were appropriately captured. These included consideration of the key variables required and their measurement, accounting for endogeneity of spending to health outcomes, the inclusion of lagged spending, discounting and future costs, the use of analytical weights, level of disease aggregation, expected duration of health gains, and modelling approaches to estimating mortality and morbidity effects of health spending. Subsequent research estimates for additional countries should (1) carefully consider the specific context and data available, (2) clearly and transparently report the assumptions made and include stakeholder perspectives on their appropriateness and acceptability, and (3) assess the sensitivity of the preferred central estimate to these assumptions.

Suggested Citation

  • Laura C. Edney & James Lomas & Jonathan Karnon & Laura Vallejo-Torres & Niek Stadhouders & Jonathan Siverskog & Mike Paulden & Ijeoma P. Edoka & Jessica Ochalek, 2022. "Empirical Estimates of the Marginal Cost of Health Produced by a Healthcare System: Methodological Considerations from Country-Level Estimates," PharmacoEconomics, Springer, vol. 40(1), pages 31-43, January.
  • Handle: RePEc:spr:pharme:v:40:y:2022:i:1:d:10.1007_s40273-021-01087-6
    DOI: 10.1007/s40273-021-01087-6

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    References listed on IDEAS

    1. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. Edney, L.C. & Haji Ali Afzali, H. & Cheng, T.C. & Karnon, J., 2018. "Mortality reductions from marginal increases in public spending on health," Health Policy, Elsevier, vol. 122(8), pages 892-899.
    3. Stephen R. Bond, 2002. "Dynamic panel data models: a guide to micro data methods and practice," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 141-162, August.
    4. Niek Stadhouders & Xander Koolman & Christel van Dijk & Patrick Jeurissen & Eddy Adang, 2019. "The marginal benefits of healthcare spending in the Netherlands: Estimating cost‐effectiveness thresholds using a translog production function," Health Economics, John Wiley & Sons, Ltd., vol. 28(11), pages 1331-1344, November.
    5. Werner Brouwer & Pieter Baal & Job Exel & Matthijs Versteegh, 2019. "When is it too expensive? Cost-effectiveness thresholds and health care decision-making," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(2), pages 175-180, March.
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    Cited by:

    1. Siverskog, Jonathan & Henriksson, Martin, 2022. "The health cost of reducing hospital bed capacity," Social Science & Medicine, Elsevier, vol. 313(C).

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