Abstract
Results from economic evaluations of long-term outcomes are strongly dependent on the chosen discount rate. A recent review of national guidelines for evaluation of healthcare interventions finds that “the level of currently used discount rates seems relatively high in many countries”. However, this conclusion comes from a comparison to rates derived or observed for investments in safe assets, while rate of return requirements are typically considerably higher when investment involves risk. This paper reviews recent literature on how to account for project-specific risk in determination of the social rate of discount and discusses implications for economic evaluation of healthcare interventions. It concludes that the available empirical evidence strongly suggests that the demand for and consumer value of health and healthcare is co-variant with income, which therefore implies that there is a non-diversifiable risk component of health-related investment.
Highlights
IntroductionThe long-term investment nature of many health-care interventions, such as vaccination programs or prenatal treatments, makes outcomes of economic evaluations strongly dependent on the choice of the discount rate
The long-term investment nature of many health-care interventions, such as vaccination programs or prenatal treatments, makes outcomes of economic evaluations strongly dependent on the choice of the discount rate. Both the finance literature and some recent research on social discounting put emphasis on how to adjust discount rates for project-specific risk but this aspect has hitherto been largely ignored within health economics
A recent overview of national guidelines on discounting in health economic evaluations in 24 countries by Attema, Brouwer and Claxton [1] shows that recommended rates vary between 0 and 5%
Summary
The long-term investment nature of many health-care interventions, such as vaccination programs or prenatal treatments, makes outcomes of economic evaluations strongly dependent on the choice of the discount rate. Both the finance literature and some recent research on social discounting put emphasis on how to adjust discount rates for project-specific risk but this aspect has hitherto been largely ignored within health economics. A recent overview of national guidelines on discounting in health economic evaluations in 24 countries by Attema, Brouwer and Claxton [1] shows that recommended rates vary between 0 and 5%.1. Based on a review of theoretical literature, the authors argue that these rates are on the high side and that lower rates may be considered to be more appropriate
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