Economic evaluations refer to a choice to be made between alternative interventions at a specific point in time, however the costs and health outcomes associated with each intervention occur at different points in time, present or future. Costs and health outcomes that are predicted to occur in the future are usually valued less than present costs, and so it is recommended that they be discounted in analysis. This is usually achieved by expressing the results as series (streams) of health outcomes and costs over time, applying a discounting factor to each value in the series and then aggregating to give a ‘present value’ of each stream. The discount factor increases over time, based on an underlying discount rate. NICE guidelines recommend that costs and health outcomes should be discounted at 3.5% per year. So, 1 QALY (or £100) experienced/spent in Year 2 would have a present value of 0.966 QALYs (£96.62). For Year 11, the present values would be 0.709 QALYs (£70.89). The choice of discount rate is of particular importance in preventive healthcare interventions: the use of a higher discount rate results in less value being attached to costs and health outcomes in the future.
How to cite: Discount Rate [online]. (2016). York; York Health Economics Consortium; 2016. https://yhec.co.uk/glossary/discount-rate/