Should Health Economic Evaluations Undertaken from a Societal Perspective Include Net Government Spending Multiplier Effects?


The fiscal multiplier represents the ratio of the change in national income to an associated increase in government spending. Fiscal multiplier effects are commonly estimated to justify options for government spending. Multiplier effects are not considered in economic evaluations of healthcare, but alternate forms of healthcare spending are expected to have varying multiplier effects. This paper describes the estimation and application of net government spending multiplier effects to two published economic evaluations. Negative net multiplier effects are estimated for an evaluated pharmaceutical for the treatment of stable cardiovascular disease, with a resulting increase in the published incremental cost per quality-adjusted life-year (QALY) gained from AU$31,244 to 47,311. Positive net multiplier effects are estimated for an evaluated healthcare delivery model for frail older people, with a resulting decrease in the published incremental cost per QALY gained from AU$8129 to 7669. The inclusion of net multiplier effects in economic evaluations undertaken from a societal perspective can have important effects on the estimated value of evaluated health technologies and services. The potential for government spending on healthcare to crowd out existing spending is considered low, but further investigation of crowding-out effects is warranted.

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Author information




JK conceptualised and designed the study, undertook the analyses and drafted the manuscript. BP contributed to the design of the study and the drafting of the manuscript.

Corresponding author

Correspondence to Jonathan Karnon.

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No sources of funding were used to conduct this study or prepare this manuscript.

Conflict of interest

Jonathan Karnon and Brita Pekarsky have been members of the economic subcommittee for the Pharmaceutical Benefits Advisory Committee in Australia.



See Table 5.

Table 5 Estimation of proportion of domestic government spending on hospitals [12]

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Karnon, J., Pekarsky, B. Should Health Economic Evaluations Undertaken from a Societal Perspective Include Net Government Spending Multiplier Effects?. Appl Health Econ Health Policy 18, 467–475 (2020).

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