Towards a new approach for estimating indirect costs of disease

Abstract

Many researchers in the field of evaluation of health care doubt the usefulness of estimates of indirect costs of disease in setting priorities in health care. This paper attempts to meet part of the criticism on the concept of indirect costs, which are defined as the value of production lost to society due to disease. Thus far in cost of illness studies and cost-effectiveness analyses the potential indirect costs of disease were calculated. In the following a first step will be taken towards a new method for estimating indirect costs which are expected to be effectuated in reality: the friction cost method. This method explicitly takes into account short and long run processes in the economy which reduce the production losses substantially as compared with the potential losses.

According to this method production losses will be confined to the period needed to replace a sick worker: the so called friction period. The length of this period and the resulting indirect costs depend on the situation on the labour market.

Some preliminary results are presented for the indirect costs of the incidence of cardiovascular disease in the Netherlands for 1988, both for the friction costs and the potential costs. The proposed methodology for estimating indirect costs is promising, but needs further development. The consequences of illness in people without a paid job need to be incorporated in the analysis. Also the relation between internal labour reserves and costs of disease should be further investigated. Next to this, more refined labour market assumptions, allowing for diverging situations on different segments of the labour market are necessary.