Education And Debate

Need for differential discounting of costs and health effects in cost effectiveness analyses

BMJ 2005; 331 doi: https://doi.org/10.1136/bmj.331.7514.446 (Published 18 August 2005) Cite this as: BMJ 2005;331:446
  1. Werner B F Brouwer (w.brouwer@erasmusmc.nl), associate professor1,
  2. Louis W Niessen, senior researcher1,
  3. Maarten J Postma, associate professor2,
  4. Frans F H Rutten1, professor
  1. 1 Institute for Medical Technology Assessment, Erasmus MC, PO Box 1738, 3000 DR Rotterdam, Netherlands
  2. 2 University of Groningen Institute for Drug Exploration, Groningen, Netherlands
  1. Correspondence to: W B F Brouwer
  • Accepted 27 June 2005

The decision of the National Institute for Health and Clinical Excellence to abandon differential discounting of future health is a step backwards and could change funding decisions

Introduction

Discounting can have a strong influence on cost effectiveness ratios for priority setting, especially in preventive interventions. It is therefore crucial that appropriate discount rates are used in economic evaluations. Increasingly, it is argued that the rate for future non-monetary health effects should be below that for future costs, to account for the growing value of health effects. The previous guidelines of the National Institute for Health and Clinical Excellence (NICE) on economic evaluation were the first national guidelines to prescribe such differential discounting (6% for costs and 1.5% for effects). However, in its latest guidelines both rates are set at 3.5%, implying a lower weight for future effects.1 We argue that this change is not based on contemporary health economic literature nor convincingly justified.

Discounting

Decisions about the resources dedicated to prevention depend on the weight given to future health in economic evaluations. Future costs and health gains are commonly weighted in relation to the time at which they occur, future costs and effects receiving less weight than present ones. This procedure is called discounting2 and is prescribed in international and BMJ guidelines for economic evaluations of health care.35

Although discounting may seem a rather technical procedure, its consequences on the cost effectiveness ratio are often substantial.2 4 68 Attaching lower weight to future health makes preventive health care seem less cost effective because such interventions typically involve current costs and future effects (table). Thus, the rate at which costs and effects are discounted can affect funding decisions.

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Effect of equal and differential discounting of money and health on cost effectiveness of preventive interventions from …

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