Approaches to Estimating Indirect Costs in Healthcare: Motivations for Choice

Mennini, Francesco Saverio and Gitto, Lara (2022): Approaches to Estimating Indirect Costs in Healthcare: Motivations for Choice.

Abstract

Abstract When performing health economic evaluations all costs and expected benefits (in terms of clinical effectiveness, utility, monetary benefits) should be taken into account. Costs are direct and indirect: concerning the latter, two main methods have been developed. The Human Capital Approach (HCA) considers the gross salary in the days of absence from work due to a disease; the method based on the Friction Costs (FC), instead, considers equally the value of productivity, but the losses are limited to the period of illness when it is necessary to replace the absent worker. This paper carries out a review of the literature contributions for European countries and aims at identifying common trends within geographical areas; estimation of indirect costs in different European area may reflect the real cost of health services across countries and schematize the conditions under which a certain method should be preferred.Overall, cost analyses applying HCA are the most frequent, while studies based on FC are more common in the Netherlands, where this method has been developed: the reasons to apply HCA or FC may depend on the institutional context, for example the flexibility in the job market, and the epidemiologic environment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Keywords: Indirect costs; Human Capital Approach (HCA); Friction Costs (FC); European countries. JEL codes: I18; J24; J32; J89; Y50.
• Subjects: I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions; J - Labor and Demographic Economics > J8 - Labor Standards: National and International > J89 - Other; Y - Miscellaneous Categories > Y5 - Further Reading (unclassified) > Y50 - Further Reading (unclassified)

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