Informal care

In the HCA, productivity costs associated with premature death are
calculated as the loss of productivity estimated as the present value of future
economic production over the expected remaining lifetime for someone of a given
age and sex [34 ]. Similarly, morbidity
costs are calculated as the value of lost productive time due to acute illness
and short- and long-term disabilities. Future market production is typically
projected based on labor force participation and employment rates, life table
survival probabilities, and hourly gross earnings, generally categorized by age
and sex or age alone. Contrary to what some experts assert [35 (link)], the HCA does not assume full employment but
instead takes into account the proportions in each age group that are employed.
Likewise, despite a misconception that the HCA, as used in COI studies, assigns
higher values to people with higher incomes [36 ], most applications of the HCA use statistical averages, not
individual incomes [37 , 38 ].
The rationale for the HCA is that the withdrawal of an
individual’s labor due to premature death or permanent disability results
in a loss to society of that individual’s future production. It is
standard practice in the HCA to estimate gross earnings, which includes payroll
taxes and other employer-paid benefits, i.e., the full cost of employee
compensation [38 –40 ]. The theoretical justification for using total
employer compensation per worker as a proxy for individual productivity is
marginal productivity theory, according to which employers equate the marginal
cost of employee time with the expected marginal contribution to output [41 ]. Some researchers find it simpler to
use reported hourly earnings (wages and salaries), excluding benefits, to
estimate productivity losses [42 (link)–44 ]. Studies taking
the latter approach generate lower estimates relative to studies using estimates
of total employer compensation.
Time spent in unpaid work can be valued in the HCA using either the
individual’s own or imputed wage (opportunity cost method) or the average
wage paid to workers performing similar services (replacement cost or proxy good
method) [45 (link)–47 (link)]. Standard US references on average productivity
by age and sex use the replacement cost method to value unpaid work [37 , 39 ]. It should be noted that European analyses typically restrict
HCA estimates to loss of paid work.
The application of the HCA in public health in the United States can be
traced to a 1961 publication by Weisbrod [48 ] that calculated the present value of expected future
productivity to value averted deaths from disease prevention. Productivity was
calculated as the sum of average earnings by age and sex and the imputed value
of unpaid household services produced by women. The inclusion of unpaid
household work reduced the very large gap in HCA valuations of male and female
deaths that resulted from the use of market earnings [48 , 49 ].
Subsequent US analysts have generally included the imputed value of household
production by individuals of both sexes when valuing premature mortality. In
contrast, researchers outside the United States often incorrectly equate the HCA
with market production, i.e., paid work [35 (link)]. Restricting HCA estimates to market productivity may be
reasonable for estimates of the costs of short-term disability [50 (link), 51 (link)].
However, if economic evaluations that are intended to be conducted from the
societal perspective exclude unpaid work that seriously devalues the time of
demographic groups that provide informal care and services to others. That is an
important limitation of HCA estimates in studies conducted in much of the
world.
A major limitation of the standard HCA from the viewpoint of economic
theory is that it does not take account of the costs of developing and
maintaining a stock of human capital, such as education and personal
consumption. Grosse and Krueger [52 ]
reviewed the historical development of human capital approaches. They noted that
the net HCA, which subtracts the cost of developing and maintaining a stock of
human capital, is consistent with human capital theory. Although Weisbrod
estimated both gross earnings and earnings net of personal consumption, the
former has generally been followed by health economists who use the HCA [48 , 52 ]. Other fields of economics (such as forensic economics) have
more commonly used a net HCA [52 ]. The
Second Panel recently recommended that societal-perspective CEAs subtract future
personal consumption from future earnings [16 (link)], which is equivalent to a net HCA.