Future costs in cost effectiveness analysis.
This paper resolves several controversies in CEA. Generalizing [Garber, A.M., Phelps, C.E., 1997. Economic foundations of cost-effectiveness analysis. Journal of Health Economics 16 (1), 1-31], the paper shows accounting for unrelated future costs distorts decision making. After replicating [Meltzer, D., 1997. Accounting for future costs in medical cost-effectiveness analysis. Journal of Health Economics 16 (1), 33-64] quite different conclusion that unrelated future costs should be included in CEA, the paper shows that Meltzer's findings result from modeling the budget constraint as an annuity, which is problematic. The paper also shows that related costs should be included in CEA. This holds for a variety of models, including a health maximization model. CEA should treat costs in the manner recommended by Garber and Phelps.
Lee
Robert H
RH
Department of Health Policy and Management, School of Medicine, University of Kansas, Mail Stop 3044, 3901 Rainbow Boulevard, Kansas City, KS 66160, United States.
D000465:Algorithms; D003362:Cost-Benefit Analysis / Q000191:economics*; D003365:Costs and Cost Analysis / Q000379:methods*; D003657:Decision Making; D004470:Economics, Medical