Societal Perspective

Societal Perspective: Productivity, Informal Care and Costs Beyond the Health Budget

An economic evaluation from the societal perspective follows the consequences of a health intervention wherever they fall: in the health service, in the time and spending of patients and families, in paid and unpaid work, and in sectors such as education or criminal justice. In practice it adds productivity, informal care, patient time and travel, and costs in other sectors to the health care costs a payer analysis already counts, which can change the answer. This page covers what a societal analysis contains, how the Second Panel on Cost-Effectiveness in Health and Medicine, the Dutch guideline and the NICE manual (PMG36) treat it, the disputes over valuing productivity and informal care, and an illustrative example in which the ICER moves with both the perspective and the productivity method. The comparison with payer, patient and employer viewpoints is on the perspective page.

The welfare reasoning behind a whole-society view

The original Panel on Cost-Effectiveness in Health and Medicine recommended a societal reference case to reflect a decision maker responsible for the broad allocation of resources across the entire population. In such an analysis, as the Second Panel restates it, the analyst considers all parties affected and counts all significant outcomes and costs, regardless of who experiences the outcomes or bears the costs. The reasoning is opportunity cost: a carer's afternoon or a worker's lost week is a resource society gives up even though no health budget pays for it.

A narrower boundary can make a cost disappear by moving it. An early discharge scheme that saves hospital days but adds weeks of family care looks cheaper to the hospital payer than it is to society. The Second Panel also records the counterweight: decision-making bodies, primarily in Europe, Australia and Canada, have generally preferred a health system perspective, and aggregating costs and effects that fall on different sectors and individuals is theoretically difficult without a consensus position on social welfare.

What a societal analysis adds: the Second Panel's impact inventory

The Second Panel recommended that every cost-effectiveness analysis report two reference case analyses, one from the health care sector perspective and one from the societal perspective. Its Table 1 assigns cost components to each, and its impact inventory template records whether each was included and on what evidence.

The template also names uncompensated household production. Analysts are asked to quantify and value non-health consequences unless their effect is likely to be negligible, to present them disaggregated by sector, and to report summary measures such as an ICER or net monetary benefit, stating which items each includes. The Panel says such consequences have generally not been considered: in one study only 341 (29%) of 1,163 cost per QALY analyses published through 2005 adopted a societal perspective, and analyses claiming one often omitted patient and caregiver time, transport or non-health sectors.

Where guidance makes it the base case, and where it does not

The Dutch guideline makes the societal analysis the base case; NICE keeps it outside the reference case. The two rules show what a societal analysis has to contain in practice.

Zorginstituut Nederland. The 2024 Dutch guideline requires a societal perspective, with a healthcare perspective scenario always reported (section 4.7.2.3). Its cost categories are healthcare costs, including those in life years gained; costs for patients and family, such as travel, own contributions, time costs and informal care; and costs in other sectors, such as municipalities or education, with productivity losses from paid and unpaid work, covering absenteeism and presenteeism. Productivity losses must be valued with the friction cost method, and informal care hours at the replacement cost of domestic care. The 2024 Dutch costing manual, as reported by Hakkaart-van Roijen and colleagues, gives 2022 reference values of EUR 19 per hour of informal care, EUR 40 per hour of paid work and a friction period of 115 calendar days (16 weeks).

NICE. PMG36 sets the reference-case cost perspective as the NHS and personal social services (PSS) and excludes productivity costs (sections 4.2.7 and 4.2.9). Productivity costs, unpaid carers' time and costs to other government bodies can enter only separately and under set conditions (sections 4.4.22 to 4.4.24). A societal analysis for NICE is therefore always a non-reference-case analysis.

Valuing productivity: human capital, friction cost and the denominator question

Under the human capital approach, as Pike and Grosse describe it, a premature death costs the present value of future production over the expected remaining lifetime, and illness costs the productive time lost, usually valued at gross earnings including employer-paid benefits. The friction cost method, presented by Koopmanschap and colleagues, recognises that long-term absentees can be replaced, so production is lost only until output is restored. Its estimates are considerably lower; in Pike and Grosse's review, cost-of-illness studies reporting both estimates found smaller losses under the friction cost approach, with a gap that varied widely.

A second dispute is where productivity belongs in the ratio. The original Panel, often called the Washington Panel, recommended counting productivity costs as health effects in the denominator, in the QALY. Brouwer, Koopmanschap and Rutten argued that this misrepresents societal costs, partly because social security and private insurance compensate patients for income reductions from disease. The Second Panel departed from the original Panel: productivity goes in the numerator of the societal reference case, while it accepts that double counting remains possible. Krol, Brouwer and Rutten conclude that empirical research favours the cost side but that there is no consensus between the two valuation methods.

Informal care, carers' health and future costs

Informal care can enter as a cost of the carer's time, as a health effect on the carer, or both. Van den Berg and colleagues describe the opportunity cost and proxy good methods as the normally recommended valuations. Elayan and colleagues, costing informal care in the Netherlands, applied both: the first values care time as forgone leisure, the second at the labour market price of a close substitute, the logic behind the Dutch replacement-cost rate. PMG36 notes that a range of methods exists and asks for sensitivity analyses using other methods (section 4.4.24). Carers' health is not unique to the societal view: the Second Panel counts QALYs accruing to caregivers, NICE includes carers' health effects when relevant (section 4.2.7), and the Dutch guideline puts carers' quality of life in a scenario analysis when the intervention affects it. Counting both carer time and carer QALYs is defensible only when they measure different losses, and the Dutch guideline asks that no double counting occurs between cost categories.

Future costs matter for life-extending treatments. The Second Panel includes future related and unrelated medical costs in both reference cases and adds future consumption unrelated to health only in the societal one, while the Dutch guideline includes healthcare costs in life years gained in the base case and asks for a scenario without unrelated future medical costs. These items raise the incremental cost of treatments that extend life, so a wider boundary does not always favour the new technology.

Worked example (illustrative): one treatment, three ICERs

The figures are illustrative, apart from the Dutch reference values for informal care (EUR 19 per hour), paid work (EUR 40 per hour) and the 16-week friction period. A treatment for working-age adults with a chronic condition gains 0.25 QALYs per patient over usual care. It costs EUR 15,000 more but avoids EUR 3,000 of hospital care, saves EUR 300 of patient time and travel, and cuts informal care by 200 hours. It also lowers the probability of a year-long work absence from 0.30 to 0.20 in people working 36 hours a week.

1. Health care sector perspective. The incremental cost is 15,000 minus 3,000 = EUR 12,000, so the ICER is 12,000 / 0.25 = EUR 48,000 per QALY gained.

2. Value the societal items. Informal care falls by 200 × 19 = EUR 3,800. Under the human capital approach a year-long absence loses 52 × 36 = 1,872 hours, worth 1,872 × 40 = EUR 74,880. Under the friction cost method production is lost only for the 16-week friction period, 16 × 36 = 576 hours, worth 576 × 40 = EUR 23,040. The 0.10 fall in the probability of absence saves 0.10 × 74,880 = EUR 7,488 or 0.10 × 23,040 = EUR 2,304.

3. Compute the societal ICER.

$$ \text{ICER}{S} = \frac{\Delta C{H} + \Delta C_{T} + \Delta C_{I} + \Delta C_{W}}{\Delta E} $$

where $\Delta C_H$ is the incremental healthcare cost, $\Delta C_T$ the change in patient time and travel costs, $\Delta C_I$ the change in informal care costs, $\Delta C_W$ the change in productivity costs (savings negative) and $\Delta E$ the incremental QALYs. With friction costs:

$$ \text{ICER}_{S} = \frac{12000 - 300 - 3800 - 2304}{0.25} = \frac{5596}{0.25} = 22384 $$

where all costs are EUR per patient, so the friction cost ICER is EUR 22,384 per QALY. With human capital costs the numerator is 12,000 minus 300 minus 3,800 minus 7,488 = EUR 412, giving 412 / 0.25 = EUR 1,648 per QALY. Leaving productivity out, the numerator is 12,000 minus 300 minus 3,800 = EUR 7,900 and the ratio EUR 31,600 per QALY.

4. Interpretation. The same clinical evidence yields EUR 48,000, EUR 22,384 or EUR 1,648 per QALY, so the valuation method moves the result about as much as the perspective. Under PMG36 the EUR 48,000 figure is the reference case; under the Dutch guideline the friction cost result is the base case. If the 0.25 QALYs partly reflect patients' valuation of lost earnings, part of the productivity saving is counted twice, which makes the EUR 31,600 figure a useful upper bound.

Boundaries with nearby concepts

The societal perspective is the widest setting of the general choice of perspective. The Second Panel's health care sector perspective keeps all formal medical costs, including out-of-pocket payments, but drops patient time, carer time, transport and other sectors. A cost-of-illness study often takes a societal view of a disease's burden but compares no alternatives, and cost-benefit analysis values health itself in money, whereas a societal cost-effectiveness analysis keeps health in QALYs.

Limitations and common misreadings

The societal perspective is easy to claim and hard to deliver. Most problems come from the gap between the label and the items actually measured and valued.

1. A label without contents. The Second Panel warns that presenting a health care sector analysis as societal has created the impression that the two are the same. An impact inventory shows what was counted.
2. Double counting. Productivity may be partly reflected in QALYs, and carer burden may appear as both a time cost and a carer QALY loss.
3. Weaker evidence. Wider items often rest on patient and carer questionnaires. The Second Panel asks analysts to describe the assumptions to which each perspective's results are sensitive, and a sensitivity analysis on the wider items shows how much of the conclusion rests on them.

Sources

• Brouwer WBF, Koopmanschap MA, Rutten FFH. Productivity costs measurement through quality of life? A response to the recommendation of the Washington Panel. Health Economics. 1997;6(3):253-259.
• Elayan S, Angelini V, Buskens E, de Boer A. The economic costs of informal care: estimates from a national cross-sectional survey in the Netherlands. The European Journal of Health Economics. 2024;25(8):1311-1331.
• Hakkaart-van Roijen L, Peeters SB, Reckers-Droog V, Evers S, Wijnen B, Huis in 't Veld LM, Thielen FW, Kanters TA. From paper to platform: updating the Dutch costing manual and launching a web application. PharmacoEconomics. 2026;44(6):727-740. https://doi.org/10.1007/s40273-026-01590-8
• Koopmanschap MA, Rutten FFH, van Ineveld BM, van Roijen L. The friction cost method for measuring indirect costs of disease. Journal of Health Economics. 1995;14(2):171-189.
• Krol M, Brouwer W, Rutten F. Productivity costs in economic evaluations: past, present, future. PharmacoEconomics. 2013;31(7):537-549.
• National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance: the manual (PMG36). 2022, updated March 2026. Sections 4.2.7, 4.2.9, 4.4.22 to 4.4.24.
• Pike J, Grosse SD. Friction cost estimates of productivity costs in cost-of-illness studies in comparison with human capital estimates: a review. Applied Health Economics and Health Policy. 2018;16(6):765-778.
• Sanders GD, Neumann PJ, Basu A, Brock DW, Feeny D, Krahn M, et al. Recommendations for conduct, methodological practices, and reporting of cost-effectiveness analyses: Second Panel on Cost-Effectiveness in Health and Medicine. JAMA. 2016;316(10):1093-1103.
• van den Berg B, Al M, van Exel J, Koopmanschap M, Brouwer W. Economic valuation of informal care: conjoint analysis applied in a heterogeneous population of informal caregivers. Value in Health. 2008;11(7):1041-1050.
• Zorginstituut Nederland. Guideline for economic evaluations in healthcare (2024 version). 16 January 2024. Sections 2.2, 3.2, 3.3.3 and 4.7.2.3.