Discounting future healthcare costs and benefits

Abstract: When making an economic case to support projects that have long-term healthcare benefits, we must quantify how we value the present against the future. Within cost-benefit analysis, this involves monetising the health effects across time and converting to a present value using an appropriate discount rate. In this talk, we will provide an overview of a range of controversies that currently surround the debate about how this discount rate should be chosen. These include normative against positive approaches to discounting, how to parameterise the standard Ramsey model that has played a pivotal role in this literature, the extent of expert disagreement on discount rates and how a policymaker might deal with conflicting academic advice, discount rates that decline with the time horizon of the project, the incorporation of project risk into the discount rate, and how potentially catastrophic outcomes can strongly influence the economic assessment of value. We will attempt to place current international policy guidance on discounting, including that contained in the UK Treasury Green Book, within the framework of these controversies and consider how governmental policies in this area might develop in future.