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Accounting for future costs in medical cost-effectiveness analysis
1University of Chicago and National Bureau of Economic Research, IL 60637, USA. dmeltzer@medicine.bsd.uchicago.edu
Abstract:
Most medical cost-effectiveness analyses include future costs only for related illnesses, but this approach is controversial. This paper demonstrates that cost-effectiveness analysis is consistent with lifetime utility maximization only if it includes all future medical and non-medical expenditures. Estimates of the magnitude of these future costs suggest that they may substantially alter both the absolute and relative cost-effectiveness of medical interventions, particularly when an intervention increases length of life more than quality of life. In older populations, current methods overstate the cost-effectiveness of interventions which extend life compared to interventions which improve the quality of life.
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