Discounting, Preferences, and Paternalism in Cost-Effectiveness Analysis

Abstract

When assessing the cost effectiveness of health care programmes, health economists typically presume that distant events should be given less weight than present events. This article examines the moral reasonableness of arguments advanced for positive discounting in costeffectiveness analysis both from an intergenerational and an intrapersonal perspective and assesses if arguments are equally applicable to health and monetary outcomes. The article concludes that behavioral effects related to time preferences give little or no reason for why society at large should favour the present over the future when making intergenerational choices regarding health. The strongest argument for discounting stems from the combined argument of diminishing marginal utility in the presence of growth. However, this hinges on the assumption of actual growth in the relevant good. Moreover, current modern democracy may be insufficiently sensitive to the con-cerns of future generations. The second part of the article categorises preference failures (which justify paternalistic responses) into two distinct groups, myopic and acratic. The existence of these types of preference failures makes elicited time preferences of little normative relevance when making decisions regarding the social discount rate, even in an intrapersonal context. As with intergenerational discounting, the combined arguments of growth and diminishing marginal utility offer the strongest arguments for discounting in the intrapersonal context. However, there is no prima facie reason to assume that this argument should apply equally to health and monetary values. To be sure, selecting an approach towards discounting health is a complex matter. However, the life-ordeath implications of any approach require that the discussion not be downplayed to merely a technical matter for economists to settle.

An Educational Review About Using Cost Data for the Purpose of Cost-Effectiveness Analysis

“…Recently, Attema et al [109] have reviewed the issues and debates around discounting, describing and discussing the current discounting recommendations of countries publishing their national guidelines. Other useful references include the work of Claxton et al [107] and Tinghög [110].…”

Discounting in the evaluation of the cost-effectiveness of a vaccination programme: A critical review

“…The social rate of time preference relates to preferences of society as a whole for present over future consumption. The appropriate way to establish this rate, and in particular how it relates to the time preference of individuals, is not straightforward [2,6]. One approach is simply to treat it as the average of individual time preferences.…”

“…Tinghög suggests that individual preferences should be overridden in a case of "myopic preference failure", where individuals are cognitively unable to process the information necessary for welfare maximisation, even if the information is technically available [6]. Parfit [54] suggests that if the reason for discounting is uncertainty about the future, then the discount rate should be varied based on the risk involved with the particular programme.…”

“…Schelling argues that pure time preference measures "emphatic distance", our preference for people closer to us in time as they are more familiar and likely to be more similar to us [55]. However, Tinghög argues that it would be unfair to disadvantage them purely because "it will benefit "us" instead of them" [6]. Sen [56] takes this further (albeit in the context of energy policy) and argues that future generations have rights to resources that we should not take away, even if their utility loss is compensated by our gains.…”

“…Constant rate discounting is supported by the discounted utility model, which states that the utility derived from consumption at a future time t is the same as the utility now multiplied by a discounting factor (1 + r) −t . However, this standard model of discounting has been challenged [4][5][6][7][8][9][10], particularly for the case of vaccines [11][12][13][14][15][16], since they have distinct characteristics not shared by many other health interventions and hence their costeffectiveness can be particularly sensitive to discounting. In light of the importance of discounting to economic evaluations of vaccines, this paper aims to survey the methodological basis and merits of alternatives to standard discounting schemes, as well as to consider how they may apply to vaccination.…”