valuing patient and caregiver time

Pharmacoeconomics 2005; 23 (5): 449-459REVIEW ARTICLE 1170-7690/05/0005-0449/$34.95/0

© 2005 Adis Data Information BV. All rights reserved.

Valuing Patient and Caregiver TimeA Review of the Literature

Jennifer E. Tranmer,1 Denise N. Guerriere,1 Wendy J. Ungar1,2,3 andPeter C. Coyte1,3,4,5

1 Department of Health Policy, Management and Evaluation, University of Toronto, Toronto,Ontario, Canada

2 Population Health Sciences, The Hospital for Sick Children Research Institute, Toronto,Ontario, Canada

3 Institute for Clinical Evaluative Sciences, Toronto, Ontario, Canada4 Canadian Health Services Research Foundation/Canadian Institutes of Health Research

Health Service Chair, Department of Health Policy Management and Evaluation, Universityof Toronto, Toronto, Ontario, Canada

5 Faculty of Nursing, University of Toronto, Toronto, Ontario, Canada

ContentsAbstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4491. Method of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4502. Existing Valuation Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451

2.1 Human Capital Method (HCM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4512.2 Friction Cost Method (FCM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4522.3 Washington Panel Approach (WPA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452

3. Critique of Existing Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4533.1 HCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453

3.1.1 Distributional Concerns with the HCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4543.2 FCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454

3.2.1 Distributional Concerns with the FCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4553.3 WPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455

3.3.1 Distributional Concerns with the WPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4564. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4575. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458

As healthcare expenditures continue to rise, financial pressures have resultedAbstractin a desire for countries to shift resources away from traditional areas ofspending. The consequent devolution and reform have resulted in increased carebeing provided and received within homes and communities, and in an increasedreliance on unpaid caregivers. Recent empirical work indicates that costs incurredby care recipients and unpaid caregivers, including time and productivity costs,often account for significant proportions of total healthcare expenditures. Howev-er, many economic evaluations do not include these costs. Moreover, whenindirect costs are assessed, the methods of valuation are inconsistent and frequent-ly controversial.

This paper provides an overview and critique of existing valuation methods.Current methods such as the human capital method, friction cost method and theWashington Panel approach are presented and critiqued according to criteria suchas potential for inaccuracy, ease of application, and ethical and distributional

450 Tranmer et al.

concerns. The review illustrates the depth to which the methods have beentheoretically examined, and highlights a paucity of research on costs that accrue tounpaid caregivers and a lack of research on time lost from unpaid labour andleisure. To ensure accurate and concise reporting of all time costs, it is concludedthat a broad conceptual approach for time costing should be developed that drawson and then expands upon theoretical work to date.

As the healthcare expenditure of many countries may underestimate total costs. This discrepancy iscontinues to rise, there is a perception of financial due in part to concerns that, when reported in fullcrisis and a resultant desire to shift resources away, economic evaluations, there is much debate andthrough devolution and reform, from traditional ar- controversy surrounding the methods for time costeas of spending (such as hospitals) to provide a valuation.[6] The lack of a consensus on a valid andgreater proportion of care within homes and com- reliable framework for valuing care recipient andmunities. As such, care recipients and their unpaid unpaid caregiver time costs has lead to methodologi-caregivers are taking on additional responsibility in cal discrepancies and the resultant exclusion of thesethe provision of such care. Costs accrued to care costs from economic evaluations.recipients and unpaid caregivers, outside of the Efforts to resolve these discrepancies and delib-healthcare sector, are commonly termed indirect erations surrounding time cost valuation havecosts and include time, productivity and travel costs. spurred a large amount of theoretical literature. Ex-Time costs refer exclusively to the value of time isting approaches have been compared and critiquedspent receiving or providing care, whereas produc- according to several criteria, including potential fortivity costs include the value of time spent receiving inaccuracy, ease of application, and ethical and dis-or providing care in addition to the value of external- tributional concerns.[1,6-20] The objective of this pa-ities associated with time losses (e.g. the cost of lost per is to provide a review of these debates and toproductivity due to absenteeism). critique existing valuation approaches. The review

focuses on three existing methods of valuing timeWhen the societal perspective is employed inlosses: (i) human capital method (HCM); (ii) frictioneconomic evaluations, all costs and benefits associ-cost method (FCM); and (iii) Washington Panelated with a given healthcare programme should beApproach (WPA). Although there are other valua-measured, including both direct and indirect costs oftion methods, we have concentrated on the abovecare.[1] As alluded to above, when the setting inthree methods as they are frequently cited in thewhich care is provided (e.g. hospital versus home) isvaluation and unpaid caregiver literature and werevaried, it becomes especially important to report themost applicable to the use of a self-administeredindirect costs. When care is provided at home, thediary – a method of particular interest to the authors.amount of formal care resource use is less, due to theEach of these costing methods is discussed andlimited availability of medical care and technology,critically reviewed with specific attention to distri-which creates an increased demand for caregiverbutional considerations.and care recipient time.

When included in economic evaluations, current 1. Method of Reviewempirical work indicates that indirect costs incurredby care recipients and unpaid caregivers, including The MEDLINE and EMBASE databases weretime, productivity and travel costs, often account for searched for articles containing the followinga significant portion (over 50%) of the total cost of keywords: ‘productivity costs’, ‘friction cost’,healthcare programmes.[2-5] Although these data in- ‘human capital’, ‘quality-adjusted-life-year’, ‘indi-dicate a need to include both time and productivity rect costs’ and/or ‘time costs’. Articles were includ-costs in economic evaluations employing a societal ed in this review if they contained an economicperspective, many comparative evaluations of new evaluation of a health programme or technology (asinterventions do not include these costs, and hence opposed to an evaluation of an environment pro-

© 2005 Adis Data Information BV. All rights reserved. Pharmacoeconomics 2005; 23 (5)

Valuing Patient and Caregiver Time: A Review 451

gramme, for example), if they employed the HCM assessed in terms of the present value of futureor FCM, or if they referenced the WPA. A time earnings. The HCM does not explicitly address howlimitation was not put on the review. to value lost productivity while at work (i.e.

‘presenteeism’); however, its principles of replace-2. Existing Valuation Approaches ment costs (as discussed later in this section) could

be applied to this loss. Similarly, although the valueof unpaid labour and/or the loss of leisure time are2.1 Human Capital Method (HCM)not explicitly considered by the HCM, these valuescan also be estimated using a broad interpretation ofTraditionally, the HCM has been employed inthe method.time-costing exercises.[21] Human capital theory

equates participation in healthcare programmes with To operationalise the HCM, care recipient andinvestment in health capital and implies that humans unpaid caregiver time losses are valued dependinghave a stock of productive ability.[22] The flow of on the activity foregone to receive or provide care.investments into capital, whether the flow is in the Time lost from employment is valued as the wageform of wages, education or investments in health, rate foregone using occupational market wages ifdoes not lead to direct reciprocal returns; it does, available, or average age- and sex-based earnings ofhowever, increase one’s stock of productive ability. the population if actual earnings data are lacking.Thus, a return on the investment in health capital is Time lost from unpaid labour is valued with a shad-measured as the value of the healthy time produced, ow price using either an opportunity or replacementapproximated by the person’s increased production cost approach.[5] The opportunity cost approach as-in the labour market. Conversely, a reduction in sumes that the value of the individual’s time provid-earnings due to illness measures production loss. ing or receiving care is equivalent to the wageThus, if it is theorised that an individual will pro- foregone to either provide or receive the care. Thus,duce a stream of output valued as individual earn- average age- and sex-based earnings may be used asings over their lifetime and that rate of pay reflects a proxy in a modified opportunity cost approach ortheir contributions to production, the HCM pre- actual earnings can be used in a true opportunity costscribes that return on human capital as a wage. approach. The replacement cost (or market value)

Human capital theory is based on several funda- approach values time lost from an activity with themental assumptions. It assumes full productivity and cost that would be incurred to hire a replacementfull employment in the market.[23-25] Full productivi- worker. Thus, the wage earned in the marketplacety is defined as 100% production for the duration of for the performance of the activity is imputed tothe employment period and full employment occurs estimate the value of the time loss. Time lost fromwhen no unemployment exists in the labour market. leisure can also be valued using the market wageThe HCM also presumes that labour markets are rate assuming that individuals are free to choosecompetitive (producers have the ability to profitably

hours worked per week and that the disutility ofsell goods and services relative to other producers of

work is incorporated into the wage.[5]similar products) and that transaction costs (costs,

It should be noted that researchers often applyabove and beyond earnings, that are associated withlabour force participation rates to the average age-either payment or receipt of earnings) are not signif-and sex-based earnings mentioned above.[10,26-28] Aicant. Thus, as a result, one’s workplace productivi-labour force participation rate represents the propor-ty is assumed to be directly proportional to one’stion of people in a given age and sex group that arestock of human capital. Workplace productivity isemployed. At any given time, some populations willassumed to be paid for (at the margin) by employershave greater or lesser employment propensities,with a wage that is in direct proportion to the em-which may be a result of both social and marketployee’s underlying contemporaneous contributionsdiscrimination.[10] Thus, the rates account for em-to the firm. Therefore, the HCM assigns a monetaryployment (and thus productivity) variations due tovalue to time using market wages for a particular

occupation. The value of healthcare programmes is age and sex that may exist as a result of prevailing


452 Tranmer et al.

social and economic contexts, including business will always be less than the friction period, as timecycles. elapses between production loss and the decision to

fill a vacancy. Time will also elapse between the2.2 Friction Cost Method (FCM) filling of the vacancy and the start of work by the

replacement worker.[29]The FCM was devised by Koopmanschap and

The estimate of production elasticity is used tovan Ineveld[16] (and subsequently further conceptu-calculate the value of lost production per worker,alised by the authors and others from Erasmus Uni-under the premise that absence results in a less thanversity, The Netherlands) in response to the per-proportional decrease in labour productivity. Forceived tendency of the HCM to measure potentialexample, if a 1% decline in labour hours wererather than actual costs. Koopmanschap and vanassociated with a 0.8% decline in productivity,Ineveld[16] argued that for short-term productionyielding an elasticity of 0.8, then the value of theloss, work might be performed by others, made upproduction loss in cost calculations would be equalupon return or, in the case of non-urgent work,to the hours lost multiplied by 80% of the hourlycancelled. Similarly, long-term production losseswage. Thus, the value of lost productivity is a func-could be reduced due to work being taken over bytion of the average value of production per employ-other employees or the reallocation of employeesee. The authors of the FCM argue that the elasticitywithin firms. Consequently, the FCM focuses onestimate reflects a composite of the diminishinglost production from the perspective of firms, con-returns on labour and the reduction in internal laboursumers and society, without accounting for the po-reserves of a firm.[29]

tential income lost on an individual basis.[22]

Overall, the FCM calculates productivity costs asThe FCM differs from the HCM in that it limitsthe sum of the value of production loss, the extrathe cost of lost production to the time period re-costs needed to re-establish the production level,quired by the firm to adapt and restore production toand the cost of hiring and replacing an individual (ifits original level. The method assumes that if thethe absence is permanent).[29] For absences less thanunemployment level in a country is greater than thethe friction period, productivity costs will be thefrictional unemployment level (the level created byaverage value of production by age, sex and educa-people moving between jobs or careers or movingtion, or wage multiplied by an estimate of produc-locations), then worker replacement is possible andtion elasticity (which may also be age, sex andproduction losses are limited to a friction period.education related) for the hours of work lost. ForThe friction period is defined as the period ex-absences greater than the friction period, costs aretending from the onset of working with reduced orequal to the costs during the friction period becauseno productivity through the period of transition andreplacement occurs after the friction period. Theadjustment and until the restoration of productivityFCM does not address the valuation of time lostthrough worker replacement. Thus, the length of thefrom leisure or time lost from unpaid labour activi-friction period depends on the internal labourties.[5,10]

reserves of the firm and prevailing unemploymentlevels. This method therefore recognises both local

2.3 Washington Panel Approach (WPA)circumstances and those specific to the particularoccupation and firm under consideration.[16] The valuation method recommended by the Panel

To operationalise the FCM, data on the average on Cost Effectiveness in Health and Medicine (theduration of a job vacancy, an estimate of production Washington Panel), appointed by the US Publicelasticity of labour hours, and the average value of Health Service,[20] simultaneously draws upon andproduction per employee are required. The average deviates significantly from both the HCM and FCM.duration of a job vacancy is used to define the The methods used in the HCM and FCM indicatecountry-specific friction period. Vacancy duration that productivity and time costs will be assignedwill depend on the country’s unemployment level monetary values and reported in the numerator ofand the efficiency of the labour market to match cost-effectiveness analyses (CEA), with the excep-demand to supply. The average vacancy duration tion of losses from leisure time (proponents of the



FCM state that leisure time should be valued in 3. Critique of Existing Approachesterms of QOL). However, the WPA differentiatesbetween the value of time lost to receive care and 3.1 HCMlosses related to morbidity and impaired ability to be

Although the HCM has been the method usedproductive in work and leisure.[30] The panel recom-traditionally and most frequently in the valuation ofmends that only the former be monetarised and thattime and productivity costs, it has been criticised forthe productivity costs not be monetarised, but in-its potential to report costs inaccurately for particu-stead be measured within the denominator of thelar populations and individuals. Some have arguedincremental cost-effectiveness ratio (ICER). Specif-that the method under estimates the indirect costs of

ically, the Washington Panel recommends that most disease because it does not recognise the value ofproductivity costs be measured as health effects life over and above economic productivity and be-through QALYs in the denominator of the ICER, cause its incorporation of labour force participationwith monetarised friction costs incurred by society rates undervalues the earnings of employed individ-and employers in the numerator. uals.[28,32] It is argued that employed persons proba-

bly possess increased lifetime employment pros-The Washington Panel recommends the abovepects compared with those who are unemployed.approach based on two perceived impacts of re-Thus, applying a participation rate to their earningsduced productivity: impaired role functioning andinappropriately underestimates the true ‘cost’ of

income reduction. Traditionally, impaired role func- their time.[32] Similarly, those arguing underestima-tioning has been measured in the denominator of the tion have noted that unpaid labour and unpaidcost-effectiveness ratio (CER) using health-related caregivers’ time are not explicitly accounted for inquality of life (HR-QOL) questionnaires. Income the method.[28] Since unpaid work often accounts forreduction, if measured, has been valued using the 50–60% of all work (paid plus unpaid) – depending

on condition, setting and socioeconomic status –HCM (and more recently with the FCM) and report-excluding this work may result in a major underesti-ed in the ICER numerator. The Washington Panelmation of total costs.[28] The exclusion of these costsargues that it is difficult for patients, as respondentsis perceived to be a significant limitation of theof QOL questionnaires, to discern between the ef-HCM.[28]

fects of time loss and those of ill health on their HR-The use of average age- and sex-based earnings

QOL. If QOL questionnaires do not explicitly askto value time lost from labour has also been ques-

patients to separate the effects of time loss, income tioned for its predictive ability.[5,33] Because theand illness on QOL, it is argued that patients will calculation of average annual earnings depends oncombine the contributions of all three when deciding demand, supply and market conditions, a cross-how to respond.[31] Thus, if productivity losses were sectional approach neglects the effects of real earn-also measured and reported in the numerator, double ings growth and birth cohort effects, while over-

emphasising the contemporaneous effects of busi-counting may occur. The Washington Panel hy-ness cycles.[10] Only the prevailing economic condi-pothesises that when an individual’s productivitytions of the year in which estimates were gathereddeclines at work, income declines in proportion towill be reflected in the valuation results. According-productivity, which results in a reduced QOL.ly, estimates drawn from years of relatively weak orTherefore, the WPA asserts that income effects arestrong economic performance will skew calcula-

captured in QOL questionnaires. It should be noted tions.that the Washington Panel does recommend that Separate from concerns surrounding underesti-productivity losses incurred by employers and soci- mation and predictive ability, most of the debateety be accounted for, using the FCM, in the numera- surrounding the use of the HCM has been centeredtor of CEA, as the patient will not account for these on its measurement of potential costs rather thanwhen answering QOL questionnaires. actual costs. Opponents argue that the HCM over


454 Tranmer et al.

estimates costs.[29] The most contentious area of this are characterised by full employment and are thusdebate is the valuation of premature death and per- able to adapt to disturbances instantaneously andmanent disability due to illness. The HCM values without cost. Furthermore, it is contended that athe total productivity loss as that incurred from the profit-maximising firm would hire workers onlytime of an event (e.g. death or onset of disability) to until the marginal revenue product of labour (thethe age of retirement discounted to present value. It extra revenue a firm gains for a given increase inis argued that real production losses to society might unit labour) equals the wage rate. In this regard, thebe smaller due to work covered by hiring someone FCM is argued to be antithetical in its use of elastici-previously unemployed or actual employees within ty parameters to account for internal labourother firms or the reallocation of duties and respon- reserves.[34] Proponents of the FCM claim that thesibilities within the same firm. above assumptions of neoclassical economic theory

might be unrealistic since unemployment is a com-Lastly, opponents citing concerns regardingmon phenomenon in most economies, and they alsooverestimation note that absence, whether short orquestion whether the marginal value of a worker islong term, leads to increased leisure time.[34] If thisequal to the cost of their labour.[34] These debates areincrease is not subtracted from the value of lostexpanded upon below.production then, theoretically, the cost of absence is

overestimated. The debate is further complicated by Johannesson and Karlsson[34] have critiqued thethe fact that the person ‘enjoying’ increased leisure FCM valuation of both short-term and long-termtime is also in ill health. absences; the authors are frequently cited in debates

surrounding the FCM.[5,17,34,40,41] With respect to3.1.1 Distributional Concerns with the HCMshort-term absences, the authors argue against theSome criticise the HCM for favouring certainvalidity of the assumptions of diminishing returns,groups within populations. For example, as the aver-internal labour reserves, and the potential of individ-age wage for working white men is greater than theuals to make up work upon return. Opponents of theequivalent for women, the very young, the elderlyFCM do concede that the potential for people toand for minorities, the value of this group’s time iscompensate or make up work upon return could bedifferentially affected within cost calculations.an appropriate argument for the tendency of theThus, in cost-benefit analyses, for example, the criti-HCM to overestimate costs. The potential overesti-cism of using earnings as a proxy for the value ofmation, however, is argued to be less than thattime is that the market value of livelihood is re-predicted by Koopmanschap et al.,[29] since to ‘makeflected rather than the value of life per se.[5] It isup’ work one must reduce leisure, and the opportu-further contended that if production losses are thennity cost of this leisure time is an appropriate inclu-measured in the numerator of the ICER, the treat-sion into the total indirect costs of disease (overesti-ment of a productive person becomes a higher prior-mation would still occur, since the opportunity costity when compared with the treatment of someoneof leisure is less than gross income). It is also agreedless productive.[7] This raises distributional concernsthat not all absences will necessarily lead to in-as programmes that improve the health of thosecreased work upon return and that work could beperceived to contribute the most to the economymade up without losing leisure as a result of in-(employed, white males) are, theoretically, givencreased effort. Proponents of the FCM maintain thathighest priority.the method considers all short-term productivitylosses in its calculations and that recent research3.2 FCMindicates compensation behaviours may reduce pro-ductivity losses even further.[42]

Critics of the FCM argue that the approach is notfounded on neoclassical economic theory and that Because Koopmanschap et al.[29] value indirectthe method rests on ‘implausible assumptions’.[34,35] costs incurred during the friction period (i.e. forThere exists a large literature[1,5,10,17-20,34,36-39] on this short-term absence) at 80% of the average value ofdebate, with opponents primarily arguing that neo- production, opponents concede that estimates of theclassical economic theory suggests that economies HCM and FCM will not differ greatly in this period.



The predictive ability of the FCM for long-term sity education. With an unemployment rate ofabsences is considered to be a more significant area 10.2%, the friction period was estimated at 2.8of concern. In this regard, Johannesson and Karl- months, while the friction period with unemploy-sson[34] assert that the FCM relies on arguable as- ment at 8.2% was estimated at 3.2 months.[16] Thus,sumptions and that the valuation of the opportunity values applied to time losses using the FCM willcost of labour at zero beyond the friction period is reflect the socioeconomic status of patients andneither supported by neoclassical economic theory caregivers and the technological skill required in thenor by empirical observations. The group from Eras- given industry. Highly specialised and technologi-mus University (who support the FCM) have replied cally advanced work will be associated with longerthat, in fact, they do not assume that the opportunity friction periods, and absences from this work will becost of labour is zero beyond the friction period and valued with higher costs. Additionally, because peo-they encourage the calculation of these medium- and ple of lesser education and social status are morelonger-term macroeconomic consequences of lost likely to be in occupations associated with shortproductivity.[40] friction periods, their time will be associated with

lower values. Proponents of the FCM state that thisFurther points of contention between the HCMis appropriate from the societal perspective; howev-and FCM include: (i) the assumptions in the FCMer, it is argued that this valuation raises similarthat vacancies created by long-term absences woulddistributional concerns to those raised by the HCM.be filled by previously unemployed persons,[34] ab-

sent worker replacement is able to reduce the overall3.3 WPAunemployment rate, and that the valuation of the

opportunity costs of leisure of the unemployed is The Washington Panel recommends that individ-zero; (ii) the inclusion of mortality costs in the FCM ual productivity costs be measured in the denomina-as valid indirect costs in economic evaluation; and tor (i.e. the effectiveness component) of the ICER to(iii) that to be applied consistently, the FCM valua- avoid double counting. Several authors have arguedtion approach would also have to be used in the this approach as being inconsistent with the princi-valuation of direct costs.[5,17,34] Regarding the first ples of CEA and susceptible to considerable er-point, opponents of the FCM contend it is likely that ror.[9,31,41] Researchers argue that the denominatorfirms will hire workers without the eventual hiring should exclusively incorporate changes in healthof someone previously unemployed and, to be con- status from the patients’ perspective,[31] and that thesistent, the FCM should measure a cost for all fric- effect of lost income is not an intrinsic health effect.tion periods created by the chain of vacancies. Pro- Opponents of the WPA do agree, however, that lossponents of the FCM claim that this approach is not of leisure time should be measured in the denomina-valid and that the ‘chain of vacancies’ leads to the tor.[9,31] It is maintained that when a patient becomesexpansion of a friction period within a firm, not unemployed (or absent) and another worker replacesmultiple friction periods.[40]

them, the absolute total of leisure time, from asocietal perspective, remains the same. Only the

3.2.1 Distributional Concerns with the FCM ability to enjoy leisure time is altered due to illness,and this is best captured in QOL measurement.For employed people, a friction period occurs

with absence from the labour market. The length of Opponents of the WPA also assert that incomethe period is based on the average duration of a job effects should not be included in the denominator ofvacancy in the given country and industry. Average CEA because income is not a part of HR-QOL. Theylengths of vacancies are directly related to socioeco- believe this claim is evidenced by the general con-nomic factors (such as education level) and specific sensus to omit questions on income in QOL mea-industry factors (such as level of technology and surement.[9,31,41] Although questions pertaining toskill involved).[16] For example, Koopmanschap and income are not likely to be included in question-van Ineveld[16] have valued the friction period in The naires for other reasons in addition to the aboveNetherlands at 2.8 months for jobs requiring basic (such as privacy concerns), their omission does al-education and 3.5 months for jobs requiring univer- low for potentially inaccurate measurement of pro-


456 Tranmer et al.

ductivity costs if using QOL questionnaires. Of appointment) and neither do they fill out QOL ornote, this argument might also be extended to the utility questionnaires concerning healthcare pro-measurement of the effects of home environment on gramme effectiveness, the WPA does not providethe quality and effectiveness of care. If a treatment is the opportunity to address their time and productivi-being undertaken at home, presumably the charac- ty costs. Similarly, if authors do not intend to useteristics of the home will either enable or constrict QOL or utility questionnaires to measure outcomes,the treatment processes. Furthermore, providing the WPA cannot be used as a valuation method.care at home will not only directly impact on the It has been argued that valuation methods basedQOL of the care recipient and caregiver, but also the on eliciting care recipient and caregiver preferencesother members of the household. It could be argued (e.g. contingent valuation, conjoint analysis) maythat this duality of homes is captured in measures of provide a more comprehensive measurement ofQOL in the denominator of CEA. For example, the caregiving time, as these methods value opportunityreduced effectiveness of treatment in a home that is costs and changes in QOL.[6,43] Capturing both theseless suitable for care provision may be captured by a costs is important, as current research indicates thatrespondent’s perception of QOL. However, this as- providing care may increase caregivers’ risk of mor-sumption could be debated as being inaccurate. As bidity and mortality, and that this risk should besuch, an argument could also be made for making included in the valuation of healthcare program-the effects of care settings explicit, just as opponents mes.[6,43] Although the impact of providing informalof the WPA argue that the effects of income should care on caregivers’ physical, emotional and mentalbe made explicit. health is certainly a timely and critical concern, the

full discussion of this issue is beyond the scope ofThe relationship conceived by the Washingtonthis review. Similarly, contingent valuation and con-Panel between productivity, income and QOL hasjoint analyses were not included in this review be-also been an area of contention and is criticised ascause these analyses were not amenable to the largerbeing incomplete. It is argued that only the effects ofstudy from which this paper was motivated.total income changes may enter into QOL valuation

and that these may not necessarily be proportionateto productivity losses.[31] Opponents to the WPA 3.3.1 Distributional Concerns with the WPAcontend that depending on the level of social bene- The fundamental difference between the WPAfits (e.g. level of disability or sick pay) in a country, and that of the HCM and FCM is that the WPAan increase in benefits (when ill) may partially com- restricts the accrual of costs to individuals. Whenpensate for the worker’s reduction in labour in- productivity costs are valued in the denominator ascome.[31] In this instance the full effects of produc- health effects, they are seen as being specific totion loss would not be reflected in responses to QOL individuals and not as a general resource cost toquestioning. Furthermore, it is argued that if social society. Thus, the total monetary costs of alternativebenefits and private insurance are allowed to influ- health programmes may appear less. Theoretically,ence results, international and interpersonal compar- this observation will not affect overall CERs, asisons of CEA would become quite difficult. Income productivity costs will diminish the value of theis also a weak proxy for productivity loss when the programme’s health effects in the denominator;loss occurs while still at work. In this instance, there however, it may affect a programme’s attractivenessare limited income effects on individuals but there when subject to political and financial review. Theare losses to the firm and society due to reduced effect, however, will be somewhat dampened be-production.[17,41] cause decisions are commonly made at the margin

using incremental CERs.A final limitation of the WPA is that it does notaccount for time losses that accrue to unpaid If the approach can be modified to reconcile thecaregivers; nor does it address the QOL of unpaid limitations discussed herein, there may be potentialcaregivers. As unpaid caregivers do not take time to benefits to be realised from the WPA. By allowingnecessarily receive healthcare treatments (although respondents to value their own productivity lossthey may be necessary to getting the patient to the (from paid labour, unpaid labour and leisure), to



Table I. Advantages and disadvantages of existing valuation approaches for measuring indirect costs

Approach Advantages DisadvantagesHuman capital method Relative ease of application Measures potential rather than actual time and

Provides guidelines for the valuation of time taken productivity costs; may underestimate or overestimatefrom paid labour, unpaid labour and leisure time

Friction cost method More accurately characterises time and productivity Difficult to operationalisecosts in markets where unemployment exists Does not value time taken from unpaid labour or

leisureFocuses on patients without equal consideration ofunpaid caregivers

Washington Panel Avoids the monetarisation of productivity losses Currently unclear whether quality-of-life measures canapproach Allows patients to report the benefits of caregiving explicitly include or exclude income effects

Focuses on patients without equal consideration ofunpaid caregivers

some extent the distributional concerns associated HCM and FCM may be appropriate for reportingwith assigning wages and productivity estimates in time costs, productivity costs should not bethe HCM and FCM, respectively, are avoided. This monetarised and should only be recorded in themethod also allows respondents to place ‘negative’ denominator of the CEA ratio through use of QOLvalues on the ‘cost’ of time spent receiving or pro- and utility measures.[20] The application of this ap-viding care; in essence, there is an opportunity to proach has been limited due to uncertainty overconsider time spent receiving or providing care as a whether current QOL and utility measures are ablebenefit, not only as a cost. Although caregivers often to adequately capture the effects of reduced produc-endure significant stresses and burdens when pro- tivity.[8] Table I summarises the advantages andviding care, there may exist a rewarding or positive disadvantages of existing valuation approaches.dimension to caring for a loved one; however, it is A limitation common to each of these valuationcautioned that the WPA makes the assumption that methods is their focus on the time and productivityindividuals will, and are able to, answer questions

losses of care recipients. The time losses of unpaidregarding caregiving accurately. This is a limitation

caregivers have not been studied with equal rigour.of the approach. There may be a social desirability

In recognition of this concern, research in this area isbias in that respondents do not wish to ‘complain’beginning to garner increased attention and ef-about work associated with caring.fort.[6,43] Similarly, when evaluating patient time andproductivity costs, time lost from paid labour has4. Discussionbeen emphasised over and above time lost fromunpaid labour and leisure. The HCM offers someThe results of this review illustrate the depth andguidelines for the valuation of unpaid caregiver andintensity by which the approaches to valuing careunpaid labour/leisure time; however neither therecipient and unpaid caregiver time have been theo-FCM nor the WPA address unpaid caregiver timeretically examined. Each of the current methods haslosses or monetarise time taken from unpaid labourbeen debated and critiqued in the literature and theiror leisure.[20,29] The authors of these approachesadvantages and limitations well discerned. Theassert that, from a societal point of view, theseHCM is attractive because of its ease of implemen-omissions may be appropriate. For example, whentation and relative simplicity;[1] however, these at-leisure time is lost in the provision of care, totaltributes potentially limit reliability and have ledleisure time remains constant; when patients leaveopponents to argue for the use of the FCM.[16] Au-work they gain leisure time, while the employeethors of the FCM emphasise its ability to capturetaking over their work loses leisure time. However,actual time and productivity costs,[16] rather thanit must be recognised that this assumption is compli-potential costs as measured with the HCM, yet thecated by the fact that patients may be in ill healthcomplexity and controversy surrounding the FCMand that the leisure time is potentially spent receiv-have limited its application to date. Members of theing care. To address these complications, some haveWashington Panel recommend that, although the


458 Tranmer et al.

suggested that patient leisure time losses may be Acknowledgementsbest measured through effects on QOL.[20] Propo-

This paper was presented, in part, at the Canadian Healthnents argue that such an approach additionally al-Economics Research Association meetings in Halifax, Nova

lows individuals to consider time spent caring (e.g. Scotia in May 2002. The authors would like to thank confer-time with a loved one) as an improvement or benefit ence participants for their contributions, especially C. Don-

aldson, S. Hadad, A. Shiell and W. Tholl. In addition, com-to their QOL and not only as a cost.ments from Bernie O’Brien were also much appreciated, asAlthough the above may prove valid reasons forwas funding from the Canadian Institutes for Health Researchnot monetarising unpaid labour/leisure costs, there(Grant number 37883). The author has no real or potential

should be accurate methods for reporting the value conflicts of interest relevant to this manuscript.of this time. Depending on their occupation andsocioeconomic status, patients and caregivers might

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