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Discounting and decision making in the economic evaluation of health‐care technologies
Author(s) -
Claxton Karl,
Paulden Mike,
Gravelle Hugh,
Brouwer Werner,
Culyer Anthony J.
Publication year - 2011
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.1612
Subject(s) - discounting , consumption (sociology) , economics , time preference , health care , value (mathematics) , cost–benefit analysis , social discount rate , actuarial science , economic evaluation , health economics , microeconomics , present value , public economics , mathematics , statistics , economic growth , ecology , social science , finance , sociology , biology
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 © 2010 John Wiley & Sons, Ltd.