What is a healthy discount rate?

The Case for Lower Discount Rates in Health Technology Assessment: Valuing Tomorrow’s Health Today

Health Technology Assessment (HTA) plays a critical role in guiding healthcare resource allocation. It helps decision-makers determine which new technologies and interventions offer the best value for money, ultimately influencing which treatments are adopted and made available to patients. A crucial, yet often overlooked, component of HTA is the discount rate. This seemingly innocuous number significantly impacts the valuation of future health benefits, and in today’s evolving economic landscape, a recalibration is long overdue.

Traditionally, HTA models have employed discount rates that mirror broader economic trends. However, the current economic climate presents a unique challenge. We are experiencing a slowing pace of consumption and, perhaps more significantly, persistently low real interest rates. These factors necessitate a reassessment of the discount rates used in HTA, arguing strongly for a downward adjustment.

But why is a lower discount rate so important in the context of health? The discount rate essentially reflects the perceived preference for receiving benefits today versus receiving them in the future. A higher discount rate implies a stronger preference for immediate gratification. Applied to healthcare, this means that future health gains, even potentially life-saving ones, are devalued compared to current costs. Conversely, a lower discount rate places a higher value on those future benefits.

Using an artificially high discount rate in HTA can lead to several problematic outcomes:

• Underinvestment in Preventative Care: Preventative measures, such as vaccinations or lifestyle interventions, often generate benefits that accrue over a long period. A high discount rate disproportionately diminishes the perceived value of these future gains, making them less likely to be approved, even if they offer significant long-term health improvements and ultimately save the healthcare system money.

• Discrimination Against Conditions with Delayed Manifestations: Treatments for diseases with slow progression or long latency periods, like certain cancers or neurodegenerative disorders, may be undervalued. The future benefits, though substantial, are discounted heavily, potentially leading to suboptimal investment in therapies for these conditions.

• Erosion of Public Trust: When HTA models consistently undervalue long-term health benefits, it can lead to public perception that the system prioritizes short-term cost savings over the long-term well-being of its citizens.

Considering the current economic realities, a discount rate in the range of 1.5% to the low 2% range would be a more realistic and ethically sound approach. This adjustment better reflects the lower opportunity cost of capital and the reduced preference for immediate consumption in a low-interest-rate environment.

Why this range? It anchors the valuation more closely to the actual returns investors are receiving in the market, providing a more accurate representation of the time value of money in the present economic context. It also acknowledges the inherent societal value of extending and improving human lives, even when those benefits are realized in the future.

Adopting a lower discount rate isn’t about arbitrarily favoring future benefits. It’s about ensuring that HTA models accurately reflect current economic conditions and, more importantly, appropriately value the long-term health and well-being of individuals and society. By embracing a more realistic discount rate, we can make more informed decisions about healthcare resource allocation, leading to a healthier future for all. The time to re-evaluate and adjust our approach is now, ensuring that we’re not discounting tomorrow’s health today.