Adjusting for Inflation and Currency Changes Within Health Economic Studies

TLDR

Health economic studies often need to adjust costs from different time periods for inflation, yet many do not report the methods in sufficient detail. The article outlines principal inflation‑adjustment methods for health economic studies in low‑ and middle‑income countries and recommends the most appropriate method for different scenarios. The authors describe three main inflation‑adjustment methods—converting local currency to US$ or international dollars then inflating with US rates, inflating local currency with local rates then converting, and splitting costs into tradable and non‑tradable resources and applying the first two methods respectively—along with issues of currency conversion and cross‑country data adjustment. In a hypothetical Vietnam example, the three methods produced adjusted costs ranging from US$116.84 to US$172.09, illustrating substantial variation, and the authors emphasize the need for transparent reporting of inflation‑adjustment methods.

Abstract

ObjectivesWithin health economic studies, it is often necessary to adjust costs obtained from different time periods for inflation. Nevertheless, many studies do not report the methods used for this in sufficient detail. In this article, we outline the principal methods used to adjust for inflation, with a focus on studies relating to healthcare interventions in low- and middle-income countries. We also discuss issues relating to converting local currencies to international dollars and US$ and adjusting cost data collected from other countries or previous studies.MethodsWe outlined the 3 main methods used to adjust for inflation for studies in these settings: exchanging the local currency to US$ or international dollars and then inflating using US inflation rates (method 1); inflating the local currency using local inflation rates and then exchanging to US$ or international dollars (method 2); splitting the costs into tradable and nontradable resources and using method 1 on the tradable resources and method 2 on the nontradable resources (method 3).ResultsIn a hypothetical example of adjusting a cost of US$100 incurred in Vietnam from 2006 to 2016 prices, the adjusted cost from the 3 methods were US$116.84, US$172.09, and US$161.04, respectively.ConclusionsThe different methods for adjusting for inflation can yield substantially different results. We make recommendations regarding the most appropriate method for various scenarios. Moving forward, it is vital that studies report the methodology they use to adjust for inflation more transparently.