ACCOUNTING FOR FUTURE COSTS IN MEDICAL COST-EFFECTIVENESS ANALYSIS

Most medical cost-effectiveness analyses include future costs only for related illnesses, but this approach is controversial. This paper dem onstrates that cost-effectiveness analysis is consistent with lifetime utility maximization only if it includes all future medical and non-m edical expenditures. Estimates of the magnitude of these future costs suggest that they may substantially alter both the absolute and relati ve cost-effectiveness of medical interventions, particularly when an i ntervention increases length of life more than quality of life. In old er populations, current methods overstate the cast-effectiveness of in terventions which extend life compared to interventions which improve the quality of life.