New Medical Treatments, Quality Improvements and Public Health Measures in the National Accounts: The Effects of the Diabetes Prevention Programme

ABSTRACT This article discusses the problem of reflecting the impact of new and improved medical treatments including preventative public health measures in measures of health services gross output and in the prices of medical and public health services. Both the treatment in main‐stream national accounts and in a satellite health account are considered. An algebraic framework is set out. In the main‐stream national accounts, the new service is initially priced at its reservation price defined with reference to gains in quality‐adjusted life years (QALYs) and reductions in costs. Withdrawn services are similarly treated. In the satellite account, the increase in QALYs plus cost savings less costs incurred are measured relative to the QALYs generated by medical services net of costs of production. The framework is applied to the UK's Diabetes Prevention Programme. The impacts on both prices and volumes of this are shown to be small.