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Differential discounting in the economic evaluation of healthcare programs
BACKGROUND: The question of appropriate discount rates in health economic evaluations has been a point of continuous scientific debate. Today, it is widely accepted that, under certain conditions regarding the social objective of the healthcare decision maker and the fixity of the budget for healthc...
Autores principales: | , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
BioMed Central
2019
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6918700/ https://www.ncbi.nlm.nih.gov/pubmed/31866768 http://dx.doi.org/10.1186/s12962-019-0196-1 |
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author | John, Jürgen Koerber, Florian Schad, Mareike |
author_facet | John, Jürgen Koerber, Florian Schad, Mareike |
author_sort | John, Jürgen |
collection | PubMed |
description | BACKGROUND: The question of appropriate discount rates in health economic evaluations has been a point of continuous scientific debate. Today, it is widely accepted that, under certain conditions regarding the social objective of the healthcare decision maker and the fixity of the budget for healthcare, a lower discount rate for health gains than for costs is justified if the consumption value of health is increasing over time. To date, however, there is neither empirical evidence nor a strong theoretical a priori supporting this assumption. Given this lack of evidence, we offer an additional approach to check the appropriateness of differential discounting. METHODS: Our approach is based on a two-goods extension of Ramsey’s optimal growth model which allows accounting for changing relative values of goods explicitly. Assuming a constant elasticity of substitution (CES) utility function, the growth rate of the consumption value of health depends on three variables: the growth rate of consumption, the growth rate of health, and the income elasticity of the willingness to pay for health. Based on a review of the empirical literature on the monetary value of health, we apply the approach to obtain an empirical value of the growth rate of the consumption value of health in Germany. RESULTS: The empirical literature suggests that the income elasticity of the willingness to pay for health is probably not larger but rather smaller than 1 and probably not smaller but rather larger than 0.2. Combining this finding with reasonable values of the annual growth rates in consumption (1.5–1.6%) and health (0.1%) suggests, for Germany, an annual growth rate of the consumption value of health between 0.3 and 1.5%. CONCLUSION: In the light of a two-goods extension of Ramsey’s optimal growth model, the available empirical evidence makes the case for a growing consumption value of health. Therefore, the current German practice of applying the same discount rate to costs and health gains introduces a systematic bias against healthcare technologies with upfront costs and long-term health effects. Differential discounting with a lower rate for health effects appears to be a more appropriate discounting model. |
format | Online Article Text |
id | pubmed-6918700 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2019 |
publisher | BioMed Central |
record_format | MEDLINE/PubMed |
spelling | pubmed-69187002019-12-20 Differential discounting in the economic evaluation of healthcare programs John, Jürgen Koerber, Florian Schad, Mareike Cost Eff Resour Alloc Methodology BACKGROUND: The question of appropriate discount rates in health economic evaluations has been a point of continuous scientific debate. Today, it is widely accepted that, under certain conditions regarding the social objective of the healthcare decision maker and the fixity of the budget for healthcare, a lower discount rate for health gains than for costs is justified if the consumption value of health is increasing over time. To date, however, there is neither empirical evidence nor a strong theoretical a priori supporting this assumption. Given this lack of evidence, we offer an additional approach to check the appropriateness of differential discounting. METHODS: Our approach is based on a two-goods extension of Ramsey’s optimal growth model which allows accounting for changing relative values of goods explicitly. Assuming a constant elasticity of substitution (CES) utility function, the growth rate of the consumption value of health depends on three variables: the growth rate of consumption, the growth rate of health, and the income elasticity of the willingness to pay for health. Based on a review of the empirical literature on the monetary value of health, we apply the approach to obtain an empirical value of the growth rate of the consumption value of health in Germany. RESULTS: The empirical literature suggests that the income elasticity of the willingness to pay for health is probably not larger but rather smaller than 1 and probably not smaller but rather larger than 0.2. Combining this finding with reasonable values of the annual growth rates in consumption (1.5–1.6%) and health (0.1%) suggests, for Germany, an annual growth rate of the consumption value of health between 0.3 and 1.5%. CONCLUSION: In the light of a two-goods extension of Ramsey’s optimal growth model, the available empirical evidence makes the case for a growing consumption value of health. Therefore, the current German practice of applying the same discount rate to costs and health gains introduces a systematic bias against healthcare technologies with upfront costs and long-term health effects. Differential discounting with a lower rate for health effects appears to be a more appropriate discounting model. BioMed Central 2019-12-17 /pmc/articles/PMC6918700/ /pubmed/31866768 http://dx.doi.org/10.1186/s12962-019-0196-1 Text en © The Author(s) 2019 Open AccessThis article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. The Creative Commons Public Domain Dedication waiver (http://creativecommons.org/publicdomain/zero/1.0/) applies to the data made available in this article, unless otherwise stated in a credit line to the data. |
spellingShingle | Methodology John, Jürgen Koerber, Florian Schad, Mareike Differential discounting in the economic evaluation of healthcare programs |
title | Differential discounting in the economic evaluation of healthcare programs |
title_full | Differential discounting in the economic evaluation of healthcare programs |
title_fullStr | Differential discounting in the economic evaluation of healthcare programs |
title_full_unstemmed | Differential discounting in the economic evaluation of healthcare programs |
title_short | Differential discounting in the economic evaluation of healthcare programs |
title_sort | differential discounting in the economic evaluation of healthcare programs |
topic | Methodology |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6918700/ https://www.ncbi.nlm.nih.gov/pubmed/31866768 http://dx.doi.org/10.1186/s12962-019-0196-1 |
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