Inclusion of Deadweight Loss in Healthcare Economic Appraisals

OBJECTIVES: Ill health may have broader impacts that extend beyond the healthcare sector. Excess mortality and morbidity in the population result in loss of productive life years and higher prevalence of disability. Loss of productivity and high rates of welfare benefits uptake can lead to loss of revenue and increased governmental spending. Although tax and transfers are not generally considered as real economic costs, they require additional tax-raising efforts to sustain budget neutrality which, in turn, results in a loss of economic efficiency known as “deadweight loss” (DL). This study aims to assess the methodological feasibility of quantifying and integrating DL into health economic appraisals.

METHODS: Narrative review of the literature to identify relevant methodologies.

RESULTS: A growing number of studies, across several disease areas, report return to work and productivity evidence. Moreover, numerous retrospective datasets report diseases’ impact on employment, wages and the demand for public (unemployment or) disability benefits. In tax research, studies have estimated the marginal cost of collecting public funds. The average marginal cost of public funds for labor taxes in the EU has been estimated at €1.90. In New Zealand, the reported estimate for the marginal cost of raising personal tax is $1.18-$2.46. Such evidence can be combined to assess disease-attributable DL and the corresponding gains from healthcare interventions. Assessment of DL can then be used to complement burden of disease studies. Long-term effects can be estimated utilizing cost-effectiveness models that simulate lifetime productive output implications. Subsequently, DL can be used in the estimation of cost-benefit ratios.

CONCLUSIONS: Reduction of DL may generate growth and promote the sustainability of tax-funded healthcare systems. The addition of DL in health economic appraisals may inform cross-sectorial resource allocation decisions.