Discounting Health and Cost-Effectiveness Analysis : a response to Nord

Abstract

Nord (2011) criticizes standard arguments which assert that consistency requires that future health benefits must be discounted at the same rate as future costs in cost-effectiveness analysis (CEA). He suggests these arguments are misguided because they require transitivity of preferences across decision contexts and that it can be appropriate to discount health at different rates depending on the programs to be compared. I claim that rejecting transitivity is unwarranted and would sharply diminish the utility of CEA. Factors that tempt Nord to reject consistency can be accommodated by recognizing that CEA does not perfectly mimic normative social preferences because it omits factors (like distribution of health in a population) that can be normatively significant. A better approach is to maintain consistency in application of CEA but authorize decision makers to depart from rankings implied by CEA when justified and to explain which specific factors justify the decision. Finally, the assertion that health must be discounted at the same rate as costs requires the additional assumption that the dollar value of health does not change over time, a point that is not always recognized in standard arguments.

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Reference

James K. Hammitt, “Discounting Health and Cost-Effectiveness Analysis : a response to Nord”, Health Economics, vol. 21, n. 7, July 2012, pp. 878–882.