Separate discounting of costs and health outcomes

Signature

PV_C = sum_(t=0)^T [C_t/(1+r_C)^t]; PV_E = sum_(t=0)^T [E_t/(1+r_E)^t]

• PV_E Total discounted health outcomes across the included time horizon (the relevant health-outcome measure)
• C_t Cost occurring at time t (currency)
• E_t Health outcome occurring at time t (the relevant health-outcome measure)
• r_C Annual discount rate applied to costs (proportion per year)
• r_E Annual discount rate applied to health outcomes (proportion per year)
• T Last included time point under the model time horizon (years)

Function

Present-value discounting function

Try this function

Implementations

• Excel

  Discount costs and outcomes separately

  Use separate named rate cells so the model remains valid when cost and outcome rates differ.

  =Cost/(1+CostRate)^Year; =Outcome/(1+OutcomeRate)^Year

Assumptions

• Rates follow the governing reference case

  The selected cost and outcome rates, whether equal or different, come from the applicable current institutional guidance.

• Comparable timing

  Cost and outcome streams use explicit timing conventions applied consistently across the alternatives being compared.

Worked examples

• Differential discounting in year 10

  A £10,000 cost and 1 QALY in year 10 have present values of £6,755.64 and 0.8617 QALYs when costs are discounted at 4% and outcomes at 1.5%.

  PV_C = 10000/(1.04)^10 = 6755.64; PV_E = 1/(1.015)^10 = 0.8617

Common errors

• Applying one rate when differential discounting is required

  Using the same rate for costs and outcomes despite a reference case requiring different rates can materially change incremental results.

Sources

• NICE manual for differential discounting

  NICE. Health technology evaluations: the manual. Section 4.5 Measuring and valuing health effects in economic evaluations.

  View source →

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