BOOKS OF RtfiDIfGS - PAHO/WHO

IClarman
- 37 -
The prevailing tendency is to take direct benefits from a single-year estimat of
costs (44). Since surviours will also experience morbidity in the futuro, some medical caro
costa are being neglected. Initially this procedure may have been associated with ma
emphasis on single-year estimates, to the exclusion of present value estimates (50). Once
the necessity of present value estimates is recognized, other explanations must be sought
for this shortcut. A possible explanation is that survivors will experience only average
morbidity in the future; when extra morbidity is absent, there is perhaps no need to deal
with morbidity. A more plausible explanation lies in the lack of longitudinal data on the
morbidity experience of defined population cohorts.
The fact is that a single-year estimate reflecta the prevalence of a disease, not its
incidence. It may be that the prevalence figure is sufficiently greater than the incidence
figure for chronic conditions, so that it makes ample allowance for future events. Indeed,
the prevalence figure in the base year is the same as the sum of the incidence figures for
all survivors to this year, if certain factors remain constant, such as the size of population,
death rates for the particular diagnostic group, and the incidence rate. When any of these
factors follows a rising trend, however, the prevalence figure exceeds the cumulative sum
of the past and present incidence figures and falls short of the sum of incidence figures
expected in the future.
To the extent that unit costs or prices tend to increase faster in the health services
sector than in the economy at large, the value of direct benefits will also increase. In my
own work 1 have incorporated an adjustment for this factor into the discount rate,
deriving thereby a net discount rate (45, 46). If econoinic growth were to slow down in
this country, the lag in productivity gains of the health services sector behind the
economy at large would be reduced, and so would the size of this adjustment.
Transportation expenses for medical care are a resource cost which is disregarded in
cost-benefit analysis, although they are allowed as deductions under the individual
income tax. When the physician made home calls, his travel expenses were automatically
included in health service expenditures. The foremost reason for neglecting them today is,
most likely, lack of reliable data. There may be the further, implicit assumption that
patients' transportation costs are of a small order of magnitude.
Indiect Benefits
Earnings lost due to premature death or disability, which will be averted, are indirect
benefits. Debility as an impairin, factor in production has not attained the prominence in
empirical studies that Mushkin (41, 51) attached to it from a conceptual standpoint.
Since the publication of Rice's studies (53) it is no longer necessary to estimate loss of
earnings on the back of an envelope. Drawing fully on the data resources of the federal
government and using unpublished tabulations almost as much as published ones,
Rice (43-44) prepared her estimates in systematic fashion. She applied labor force
participation rates, employment rates, and mean earnings, inclusive of fringe benefits, to
the population cohort in question. For men and women separately, she derived estimates
of the present values of lost earnings due to mortality under alternative discount rates and
a one-year estimate of lost earnings due to disability or morbidity.
Several elements of the benefit calculation that were still at issue a decade or so ago
appear to be more or less settled now, some perhaps prematurely. These can be
summarized as follows: