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Discounting and decision making in the economic evaluation of health‐care technologies

Author

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  • Karl Claxton
  • Mike Paulden
  • Hugh Gravelle
  • Werner Brouwer
  • Anthony J. Culyer

Abstract

Discounting costs and health benefits in cost-effectiveness analysis has been the subject of recent debate – some authors suggesting a common rate for both and others suggesting a lower rate for health. We show how these views turn on key judgments of fact and value: on whether the social objective is to maximise discounted health outcomes or the present consumption value of health; on whether the budget for health care is fixed; on the expected growth in the cost‐effectiveness threshold; and on the expected growth in the consumption value of health. We demonstrate that if the budget for health care is fixed and decisions are based on incremental cost effectiveness ratios (ICERs), discounting costs and health gains at the same rate is correct only if the threshold remains constant. Expecting growth in the consumption value of health does not itself justify differential rates but implies a lower rate for both. However, whether one believes that the objective should be the maximisation of the present value of health or the present consumption value of health, adopting the social time preference rate for consumption as the discount rate for costs and health gains is valid only under strong and implausible assumptions about values and facts. Copyright (C) 2010 John Wiley & Sons, Ltd.

Suggested Citation

  • Karl Claxton & Mike Paulden & Hugh Gravelle & Werner Brouwer & Anthony J. Culyer, 2011. "Discounting and decision making in the economic evaluation of health‐care technologies," Health Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 2-15, January.
  • Handle: RePEc:wly:hlthec:v:20:y:2011:i:1:p:2-15
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    File URL: http://hdl.handle.net/10.1002/hec.1612
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    Citations

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    Cited by:

    1. E. Wetering & E. Stolk & N. Exel & W. Brouwer, 2013. "Balancing equity and efficiency in the Dutch basic benefits package using the principle of proportional shortfall," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(1), pages 107-115, February.
    2. Round, Jeff, 2012. "Is a QALY still a QALY at the end of life?," Journal of Health Economics, Elsevier, vol. 31(3), pages 521-527.
    3. Weatherly, Helen & Drummond, Michael & Claxton, Karl & Cookson, Richard & Ferguson, Brian & Godfrey, Christine & Rice, Nigel & Sculpher, Mark & Sowden, Amanda, 2009. "Methods for assessing the cost-effectiveness of public health interventions: Key challenges and recommendations," Health Policy, Elsevier, vol. 93(2-3), pages 85-92, December.
    4. Karl Claxton & Simon Walker & Steven Palmer & Mark Sculpher, 2010. "Appropriate Perspectives for Health Care Decisions," Working Papers 054cherp, Centre for Health Economics, University of York.
    5. E. Wetering & N. Exel & J. Rose & R. Hoefman & W. Brouwer, 2016. "Are some QALYs more equal than others?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(2), pages 117-127, March.
    6. Mike Paulden & Anthony J Culyer, 2010. "Does cost-effectiveness analysis discriminate against patients with short life expectancy? Matters of logic and matters of context," Working Papers 055cherp, Centre for Health Economics, University of York.
    7. Mike Paulden & James O’Mahony & Anthony Culyer & Christopher McCabe, 2014. "Some Inconsistencies in NICE’s Consideration of Social Values," PharmacoEconomics, Springer, vol. 32(11), pages 1043-1053, November.
    8. Michael Spackman, 2013. "Government Time Discounting and Required Rates of Return: UK History and Current Issues," Economic Affairs, Wiley Blackwell, vol. 33(2), pages 190-206, June.
    9. Arthur E. Attema & Han Bleichrodt & Olivier L’Haridon & Patrick Peretti-Watel & Valérie Seror, 2018. "Discounting health and money: New evidence using a more robust method," Journal of Risk and Uncertainty, Springer, vol. 56(2), pages 117-140, April.
    10. Michael Spackman, 2011. "Government discounting controversies: changing prices, opportunity costs and systematic risk," GRI Working Papers 67, Grantham Research Institute on Climate Change and the Environment.
    11. repec:eee:socmed:v:200:y:2018:i:c:p:59-64 is not listed on IDEAS
    12. Attema, Arthur & Krol, Marieke & van Exel, Job & Brouwer, Werner, 2014. "New findings from the TTO for income approach to elicit willingness to pay for a QALY," MPRA Paper 61197, University Library of Munich, Germany.
    13. Versteegh, M.M. & Brouwer, W.B.F., 2016. "Patient and general public preferences for health states: A call to reconsider current guidelines," Social Science & Medicine, Elsevier, vol. 165(C), pages 66-74.
    14. Bobinac, Ana & van Exel, N. Job A. & Rutten, Frans F.H. & Brouwer, Werner B.F., 2012. "GET MORE, PAY MORE? An elaborate test of construct validity of willingness to pay per QALY estimates obtained through contingent valuation," Journal of Health Economics, Elsevier, vol. 31(1), pages 158-168.
    15. 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.
    16. Christopher McCabe & Richard Edlin & Peter Hall, 2013. "Navigating Time and Uncertainty in Health Technology Appraisal: Would a Map Help?," PharmacoEconomics, Springer, vol. 31(9), pages 731-737, September.
    17. Mike Paulden & Anthony J. Culyer, 2010. "Does Cost-Effectiveness Analysis Discriminate against Patients with Short Life Expectancy?," Working Paper series 41_10, Rimini Centre for Economic Analysis.
    18. Pieter Baal & David Meltzer & Werner Brouwer, 2013. "Pharmacoeconomic Guidelines Should Prescribe Inclusion of Indirect Medical Costs! A Response to Grima et al," PharmacoEconomics, Springer, vol. 31(5), pages 369-373, May.
    19. Mareike Schad & Jürgen John, 2012. "Towards a social discount rate for the economic evaluation of health technologies in Germany: an exploratory analysis," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(2), pages 127-144, April.

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