Revised December 2024
This paper discusses the problem of reflecting the impact of new and improved medical
treatments including preventative public health measures in measures of health services
gross output and in the prices of medical and public health services. Both the treatment in
mainstream national accounts and in a satellite health account are considered. An
algebraic framework is set out. In the mainstream national accounts the new service is
initially priced at its reservation price defined with reference to gains in quality-adjusted life
years (QALYs) and reductions in costs. Withdrawn services are similarly treated.
In the satellite account, the increase in QALYs plus cost savings less costs incurred are
measured relative to the QALYs generated by medical services net of costs of production.
The framework is applied to the UK’s Diabetes Prevention Programme. The impacts on
both prices and volumes of this are shown to be small.
The original version of this paper was published on 15 October 2024.