Elsevier

Social Science & Medicine

Volume 62, Issue 4, February 2006, Pages 835-845
Social Science & Medicine

Economic valuation of informal care: Lessons from the application of the opportunity costs and proxy good methods

https://doi.org/10.1016/j.socscimed.2005.06.046Get rights and content

Abstract

This paper reports the results of the application of the opportunity costs and proxy good methods to determine a monetary value of informal care. We developed a survey in which we asked informal caregivers in The Netherlands to indicate the different types of time forgone (paid work, unpaid work and leisure) in order to be able to provide care. Moreover, we asked informal caregivers how much time they spent on a list of 16 informal care tasks during the week before the interview. Data were obtained from surveys in two different populations: informal caregivers and their care recipients with stroke and with rheumatoid arthritis (RA). A total of 218 care recipients with stroke and their primary informal caregivers completed a survey as well as 147 caregivers and their care recipients with RA. The measurement of care according to both methods is more problematic compared to the valuation. This is especially the case for the opportunity costs method and for the housework part in the proxy good method. More precise guidelines are necessary for the consistent application of both methods in order to ensure comparability of results and of economic evaluations of health care.

Introduction

Informal care plays a substantial role in the total care provided, especially in cases of care for people with chronic diseases and the terminally ill (Norton, 2000). Because caregivers sacrifice (amongst other resources) time to provide care, informal care should be incorporated in an economic evaluation taking a societal perspective (Drummond, O’Brien, Stoddart, & Torrance, 1997; Luce, Wanning, Siegel, & Lipscomb, 1996). Despite the recommendation to include informal care in economic evaluations, in practice it is often neglected (Stone, Chapman, Sandberg, Liljas, & Neumann, 2000). It is quite common to consider informal care as a cost in an economic evaluation and it is therefore suggested to incorporate changes in the use of informal caregiver time as direct non-health care costs into the numerator of the cost-effectiveness ratio (Luce et al., 1996, p. 177).1 This implies that informal caregivers’ time should be valued in monetary terms. It is often recommended to use either the opportunity costs method or the proxy good method (also known as the replacement cost method) to value the time investment in informal care (Drummond et al., 1997; Luce et al., 1996; Posnett & Jan, 1996). Both methods have their strengths and weaknesses (McDaid, 2001; Van den Berg, Brouwer, & Koopmanschap, 2004). However, from a theoretical point of view the opportunity costs method is preferred (Posnett & Jan, 1996).

Although alternative monetary valuation methods such as contingent valuation and conjoint measurement are proposed and applied to value informal care (Van den Berg, Al, Brouwer, Van Exel, & Koopmanschap, 2005; Van den Berg, Bleichrodt, & Eeckhoudt, 2005; Van den Berg, Brouwer, Van Exel, & Koopmanschap, 2005), the opportunity costs and proxy good methods are most advocated and most often used. One important reason for recommendations to use either one of these methods may be their relatively straightforward application. In economic evaluations, where the focus is on the care recipients rather than on informal caregivers, this may be considered an advantage.

Informal care in practice is often neglected in economic evaluations where it is an important input. This may be due to various factors which include: (1) informal care is simply overlooked; (2) it is not overlooked but disregarded; (3) many health technology assessment guidelines recommend conducting economic evaluations from more narrow perspectives than the societal perspective or (4) informal care is considered relevant but researchers may have difficulties with measuring or valuing it, because guidelines and handbooks are quite short about these issues and recommended valuation methods are less straightforward to apply than they first appear.

In terms of measurement of informal care as an input in health care, some important problems exist. One problem is the difficulty in measuring time forgone in order to provide informal care. Especially, when proving care started many years ago, as is often the case in chronic diseases, the normal activities forgone are difficult to indicate for caregivers. Another problem concerns the distinction between “normal” housework and additional housework due to the health problems of the care recipient. If this distinction is not properly made it is easy to overestimate the time spent on informal care. Regarding the valuation of informal care, it may be difficult to find appropriate opportunity costs estimates for all different time uses and groups of caregivers. In using the proxy good method, problems may arise in finding appropriate wages of professional substitutes who might perform the care activities if no informal caregiver was available.

In this paper we discuss the application of the opportunity costs method and proxy good method in two caregiver populations—informal caregivers of care recipients with stroke and caregivers of care recipients with rheumatoid arthritis (RA). Our aim is to assess the costs of informal care in these two populations using both the opportunity costs and proxy good methods. Moreover, we wish to detect the major problems in using these often recommended methods. Application of these two methods in such distinct populations is useful in this context. Stroke is an acute condition with a clear starting point, while RA is a slowly progressive chronic disease without a clear starting point. A starting point is important for the measurement of time forgone and time spent on informal care and therefore has important implications for the application of the opportunity costs method and proxy good method. We also propose solutions for the problems in measuring time forgone when a clear starting point is unavailable and for the distinction between “normal” housework and informal care.

Section snippets

Opportunity costs method

Conceptually, the opportunity costs method values the inputs of the production process. However, in practice it often values informal care according to Eq. (1):Valueinformalcare=tiwi,where ti is the time spent on care tasks by caregiver i, and wi the net market wage rate of i. If i is unemployed, a proxy for wi is used, e.g., a modified opportunity costs method to find out the reservation wage of the caregiver: the wage rate for what an individual is willing to supply at least 1 h on the labour

Applying the methods in two populations

The populations were approached as part of larger studies: an evaluation of stroke units for care recipients with stroke and a study on health and health care utilization among care recipients with RA. Some of the information gathered in the two studies was therefore not fully symmetrical, but this mainly pertains to additional information.

Discussion

This paper discusses, applies and compares two often recommended methods to value informal care in economic evaluations: the opportunity costs and proxy good methods. Valuing informal care firstly implies a valid measurement of the amount and sources of time forgone in order to be able to provide care (opportunity costs method), or measurement of the amount of time invested in informal care (proxy good method). Secondly, it implies economic valuation: determining valid shadow prices per hour of

Acknowledgments

The stroke part of this paper was presented at the Third World Conference of the international Health Economics Association (iHEA) 2001 in York. We would like to thank the editor and two anonymous referees for useful comments on an earlier version of the paper and Liz Chinchen for editing the English. We acknowledge The Netherlands Organization for Health Research and Development (ZON-MW) (Grant no. 945-10-044) for their funding.

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