"Discounting is a mathematical procedure for adjusting future health care costs and outcomes to 'present value,'" say Johan L. Severens, PhD and Richard J. Milne PhD, authors of an editorial published in the July issue of Value in Health . This economic process allows comparison of healthcare programs with immediate benefits, such as renal dialysis, with those that have longer-term benefits, such as screening and pediatric vaccination for hepatitis B.
The method that is generally used, which discounts health benefits at the same constant rate as costs ("uniform discounting"), gives high priority to health interventions that have immediate benefits at the expense of interventions where benefits are not experienced until many years in the future. Relatively low value is attributed to health interventions with benefits that occur in the distant future.
According to the literature summarized in their editorial, the magnitude of individuals' preference to gain health outcome as soon as possible and to postpone expenses, reflected by the so called 'time preference,' varies widely. Individuals also report higher time preferences regarding the near future, which suggests that discount rates for health benefits should decline with time. Little evidence supports uniform discounting.
No empirical evidence exists to determine an optimal and final solution regarding the methodology for discounting in economic evaluation. This overview suggests that the current method of discounting should be reconsidered. Different countries may need to set up their own methodologies according to their local economies and healthcare priorities.
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About the Authors
Johan L. Severens, PhD is Professor of Medical Technology Assessment in the Department of Health Organization Policy and Economics at Maastricht University in The Netherlands. He also serves as co-head of the department of Clinical Epidemiology and Medical Technology Assessment of the University Hospital Maastricht and is co-editor of Value in Health , the official journal of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Dr. Severens was responsible for the development of the Pharmacoeconomic Dossier Assessment Form of the Dutch Health Care Insurance Board and has co-authored numerous articles published in peer-reviewed journals. Dr. Severens can be reached for questions and interviews at h.severens@beoz.unimaas.nl.
Richard J Milne PhD, MRSNZ, is Associate Professor in Pharmacoeconomics at the University of Auckland, New Zealand, and Managing Director of the pharmacoeconomics consultancy company, Health Outcomes Associates Ltd. Dr. Milne was Founding Editor of PharmacoEconomics; he is currently a member of its Editorial Board as well as a Co-Editor of Value in Health . Dr. Milne has published widely in peer reviewed journals.
About Value in Health
Value in Health is a multidisciplinary peer-reviewed journal reporting on evaluations of medical technologies including pharmaceuticals, biologics, devices, procedures, and other health care interventions. The Journal provides a scientific forum for communicating health economics and outcomes research methods and findings, furthering ISPOR's vision that "society allocate scarce health care resources wisely, fairly, and efficiently." Value in Health is also a sounding board for the discussion of health policy issues related to health economics and outcomes studies associated with all medical technologies. Topics include cost effectiveness/cost utility/cost benefit analysis, health utilities/preferences, health-related quality of life/health status research, medical practice guidelines, disease management, study designs (prospective, retrospective, and modeling), and critical reviews of existing literature.
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Value in Health