Chapter 7: Further Issues of Cost-Effectiveness Analysis
7. Further issues of cost-eﬀectiveness analysis 7.1 INTRODUCTION Although economists are unanimous in adopting discounting for costs, there is no such widespread agreement in the health care ﬁeld for discounting eﬀects. If costs are discounted and eﬀects are left undiscounted, obviously C/E ratios would be radically altered. Even when discounting of eﬀects is accepted, not everyone agrees that the discount rate on eﬀects should be the same as that used for costs. The second section addresses these issues. From there we proceed to a second main theme, i.e., how do CEAs need to be conducted and interpreted when the values that we use for C and E are average ones that may come from a sample with a large amount of sampling variation? Our ﬁrst task is to cover some background issues concerning these two themes. 7.1.1 When is Discounting Especially Needed? Discounting is particularly important for screening or preventative programs for which the costs are immediate, but the health eﬀects are in the future. Otherwise, as Viscusi (1995) points out, discounting is important when health eﬀects are cumulative (diet or exercise programs) and / or occur with a lag (cigarette smoking). Any major surgery has long-term eﬀects that require discounting. Environmental eﬀects aﬀect future generations (e.g., Taxol used in treatment for cancer comes from the bark of Paciﬁc Yew trees and thus the stock of these trees gets depleted when the Taxol drug is manufactured). Drug companies must...
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