Time-Series Properties of Medical Care Net Discount Rates
Journal of Legal Economics
The purpose of this paper is to examine the usefulness of using a net discount rate (NDR) based on historical data to estimate the present value of the cost of future medical care goods and/or services. Such goods and services often comprise the largest part of the typical life-care plan. Specifically, the time-series properties of various medical care net discount rates are analyzed. If it can be demonstrated that a particular net discount rate is covariance stationary (i.e., exhibits random fluctuations around a constant long-term mean), it can be argued that such an historical NDR may be appropriate for present value calculations. Conversely, if a particular NDR is nonstationary, the historical long-run NDR probably has little predictive power.
Bowles, Tyler J., and W. Cris Lewis. “Time-Series Properties of Medical Care Net Discount Rates.” Journal of Legal Economics 10(2):1-12 (published Winter 2002).