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journal article Jun 06, 2001

Discounting for health effects in cost–benefit and cost‐effectiveness analysis

Hugh Gravelle Dave Smith ORCID
Health Economics Vol. 10 No. 7 pp. 587-599 · Wiley
View at Publisher Save 10.1002/hec.618
Abstract
AbstractWhen health effects can be valued in monetary terms, as in cost–benefit analysis, they should be discounted at the same rate as costs. If health effects are measured in quantities (e.g. quality adjusted life years) as in cost‐effectiveness analysis (CEA) and the value of health effects is increasing over time, discounting the volume of health effects at a lower rate than costs is a valid method of taking account of the increase in the future value of health effects. We show that the Keeler–Cretin paradox, often used as an argument against discounting health effects at a lower rate than costs, has no relevance for the choice of discount rate in CEA. We present individualistic and welfare models to argue that the rate of growth of the value of health effects is positive. The welfare model suggests that the value of health grows at a rate dependent on the rate of growth of the value of the direct effect of health on utility, the growth rate of income, the elasticity of the marginal utility of income and the extent to which individuals are insured against the income risks of ill health. Copyright © 2001 John Wiley & Sons, Ltd.
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Metrics
122
Citations
35
References
Details
Published
Jun 06, 2001
Vol/Issue
10(7)
Pages
587-599
License
View
Authors
H
Hugh Gravelle

Centre for Health Economics University of York York UK

D
Dave Smith

Science and Technology Facilities Council (STFC), Rutherford Appleton Laboratory Space (RAL Space), Harwell Oxford OX11 0QX, UK

Cite This Article
Hugh Gravelle, Dave Smith (2001). Discounting for health effects in cost–benefit and cost‐effectiveness analysis. Health Economics, 10(7), 587-599. https://doi.org/10.1002/hec.618
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