The “Stock of Time” Method: A New Approach to Calculate Indirect Costs and Benefits in Economic Evaluations

BackgroundHealth interventions affect people's welfare directly by impacting people's health but also indirectly via a change in consumption and leisure time caused by the change in health. This study discusses 2 ongoing issues in the economic evaluation of health interventions. The first is how to value a change in the amount of leisure time of a patient. The second issue concerns the valuation of a change in production.MethodsWe present a theoretical model that assumes that individual utility depends on health, consumption, and leisure time. We assume that the total stock of time consists of 3 components: leisure time, working time, and recovery time. The model takes a societal perspective and assumes that individuals optimize their utility, conditional on time and budget restrictions.ResultsFor the first issue, the model indicates that the value of a change in the stock of time available for leisure and work has to be added to the direct effects of a health intervention, instead of only a change in work hours. For the second issue, the model indicates that in case of a change in longevity, only the change in taxes paid may be counted because the income change is included in the value of the change in quality-adjusted life-years. A numerical example shows that this approach may counterbalance the potential overestimation of the welfare effects of treatments with the human capital method and underestimation related to the friction cost method.ConclusionWe propose a new method that includes the welfare effects of health interventions due to a change in the amount of leisure time and avoids double counting of welfare changes, which are included in the direct effects.HighlightsWe present a theoretical model and use it to analyze 2 issues in the economic evaluation of health interventions: the inclusion of leisure time and the valuation of production.The model indicates that the effects of health changes on the amount of both work and leisure hours need to be taken into account in economic evaluation.As to the valuation of production, the model indicates that in case of a change in longevity, only the change in taxes may be counted.We propose the "stock of time" method to value changes in working hours and leisure hours, which may counterbalance potential overestimates and underestimates in established methods.