APPROPRIATE DISCOUNTING AND DECISION RULES IN THE ECONOMIC EVALUATION OF HEALTH CARE TECHNOLOGIES

Purpose: To establish appropriate discounting rules for costs and health benefits, and demonstrate that they depends critically on whether the budget for health care is regarded as fixed and whether the social objective is to maximise the present consumption value of health or health itself.

Methods:  Discounting of costs and health benefits in cost-effectiveness analysis has been the subject of recent debate - some suggesting a common rate for both and others suggesting a lower rate for health. We derive optimal discounting for decision rules based on incremental cost-effectiveness ratios (ICERs) and net health and consumption benefit for a range of possible circumstances.  Using simple numerical examples we show how each of the views expressed about discounting turn on some key judgements of fact and value.  Most importantly: whether the social objective is to maximise discounted health outcomes or the present consumption value of health; whether the budget for health care is fixed; the expected growth in the cost-effectiveness threshold; and the expected growth in the consumption value of health.  In addition we consider the implications for a health care system when some costs fall on a fixed budget and others fall directly on consumption.    

Results:  We demonstrate that if the budget for health care is fixed, it is the growth in the cost-effectiveness threshold which may justify a higher discount rate on costs (not a lower rate on health) when decision are based on ICERs.  Any growth in the consumption value of health does not justify a lower discount rate for health but a lower common rate for both even if the social objective is to maximise consumption value of health rather than health itself.  The more familiar result that a growth in consumption value of health can justify a lower discount rate on health is only sustainable when the budget for health care is not fixed (all costs fall on consumption) and consumption value is the social objective.     

Conclusions:  Whether costs and health benefits should be discounted at the same rate and what rate(s) should be used has been controversial.  Reimbursement authorities around the world also differ in their guidance.  We show which discounting rules should be adopted given answers to some key questions of fact and value.