Anti-social welfare functions: a reply to Hansen et al

We could reasonably expect society to give at least the same weight to the marginal utility of the poor as to the rich, and to the marginal utility of the ill as compared to the healthy. Whilst Hansen et al. [Journal of Health Economics (2004)], may be said to link CEA and CBA within a welfarist framework, the assumptions they require are inconsistent with these types of ethical preferences. Thus, the degree to which they employ a reasonable social welfare function is doubtful. This paper argues that any link between CEA and CBA will occur not within a welfarist framework but instead within a non-welfarist one in which it is unlikely that CBA results could be easily transformed into cost-effectiveness ratios.     

On the welfare theoretic foundation of cost-effectiveness analysis—the case when survival is not affected

This paper develops a welfare theoretic foundation for cost-effectiveness analysis (CEA) when survival is not affected. With this foundation, all costs and their corresponding utility-terms should be included. A key question, though, is whether these utility-terms are consistent with quality-adjusted life year (QALY) (utility) theory or not. The results show that health care costs and changes in the utility of health should be included. However, as QALYs do not capture the utility of changes in consumption (as this utility must be independent of health, according to QALY theory), the corresponding changes in consumption costs should be excluded. Regarding the costs for changes in absence from work, these should only be included if the utility of changes in the amount of leisure is included. As no QALY theory has been developed that includes this utility, it is unclear how to handle these costs (even if there are arguments for excluding them). For changes in productivity at work, though, there are robust arguments for the inclusion of these costs. Overall, it seems difficult to provide a clear basis for CEA in economic welfare theory when also including non-medical goods such as consumption and leisure.     

A welfare-theoretic model consistent with the practice of cost-effectiveness analysis and its implications

I look at three debates in the health economics literature in the context of cost-effectiveness analysis (CEA): 1) inclusion of future costs, 2) discounting, and 3) consistency with a welfare-economic perspective. These debates thus far have been studied in isolation leading to confusion and lingering questions. I look at these three debates holistically and present a welfare theoretic model that is consistent with the practice of CEA and can help inform all of these three debates. It shows rationales for the recommendations of the Second Panel and clarifies some nuanced implications for the practice of CEA when taking a societal perspective in the context of distributional CEA and multi-sectorial budgets.     

Inquiry into the Relationship between Equity Weights and the Value of the QALY

BackgroundA commonly held view of the decision rule in economic evaluations in health care is that the final incremental cost-effectiveness ratio needs to be judged against some threshold, which is equal for all quality-adjusted life-year (QALY) gains. This reflects the assumption that “a QALY is a QALY” no matter who receives it, or the equity notion that all QALY gains are equally valuable, regardless of the context in which they are realized. If such an assumption does not adequately reflect the distributional concerns in society, however, different thresholds could be used for different QALY gains, whose relative values can be seen as “equity weights.”AimOur aim was to explore the relationship between equity or distributional concerns and the social value of QALYs within the health economics literature. In light of the empirical interest in equity-related concerns as well as the nature and height of the incremental cost-effectiveness ratio threshold, this study investigates the “common ground” between the two streams of literature and considers how the empirical literature estimating the incremental cost-effectiveness ratio threshold treats existing distributional considerations.     

The relative value of different QALY types

The oft-applied assumption in the use of Quality Adjusted Life Years (QALYs) in economic evaluation, that all QALYs are valued equally, has been questioned from the outset. The literature has focused on differential values of a QALY based on equity considerations such as the characteristics of the beneficiaries of the QALYs. However, a key characteristic which may affect the value of a QALY is the type of QALY itself. QALY gains can be generated purely by gains in survival, purely by improvements in quality of life, or by changes in both. Using a discrete choice experiment and a new methodological approach to the derivation of relative weights, we undertake the first direct and systematic exploration of the relative weight accorded different QALY types and do so in the presence of equity considerations; age and severity. Results provide new evidence against the normative starting point that all QALYs are valued equally.     

Valuing the benefits and costs of health care programmes: where's the 'extra' in extra-welfarism?

The application of Sen's notion of capabilities to problems of the allocation of resources to health in the form of an extra-welfarist framework underlies the justification of quality adjusted life years (QALYs) as the method for valuing the benefits of health care. In this paper we critically appraise this application from both conceptual and empirical perspectives. We show that the alleged limitations of the welfarist approach are essentially limitations in its application, not in the capacity of the approach to accommodate the concerns of extra-welfarists. Moreover, the arguments used to justify the application of the extra-welfarist framework are essentially welfarist. We demonstrate that the methods used to measure QALYs share their basic theoretical roots with welfarist valuation methods, such as willingness to pay (WTP). Although QALYs and WTP share many challenges, we argue that WTP provides a method which performs better with respect to those challenges. In the context of evaluating alternative allocations of health care resources we are left asking what is 'extra' in extra-welfarism?     

Integrating Alternative Social Value Judgments Into Cost-Effectiveness Analysis of Vaccines: An Application to Varicella-Zoster Virus Vaccination

ObjectivesCost-effectiveness analyses (CEA) are based on the value judgment that health outcomes (eg, quantified in quality-adjusted life-years; QALYs) are all equally valuable irrespective of their context. Whereas most published CEAs perform extensive sensitivity analysis on various parameters and assumptions, only rarely is the influence of the QALY-equivalence assumption on cost-effectiveness results investigated. We illustrate how the integration of alternative social value judgments in CEA can be a useful form of sensitivity analysis.MethodsBecause varicella-zoster virus (VZV) vaccination affects 2 distinct diseases (varicella zoster and herpes zoster) and likely redistributes infections across different age groups, the program has an important equity dimension. We used a cost-effectiveness model and disentangled the share of direct protection and herd immunity within the total projected QALYs resulting from a 50-year childhood VZV program in the UK. We use the UK population’s preferences for QALYs in the vaccine context to revalue QALYs accordingly.ResultsRevaluing different types of QALYs for different age groups in line with public preferences leads to a 98% change in the projected net impact of the program. The QALYs gained among children through direct varicella protection become more important, whereas the QALYs lost indirectly through zoster in adults diminish in value. Weighting of vaccine-related side effects made a large difference.ConclusionsOur study shows that a sensitivity analysis in which alternative social value judgments about the value of health outcomes are integrated into CEA of vaccines is relatively straightforward and provides important additional information for decision makers to interpret cost-effectiveness results.     

Ethical Issues in the Economic Assessment of Health Care Technologies

This paper challenges traditional views which oppose health economics and medical ethics by arguing that economic assessment is a necessary complement to medical ethics and can help to improve public participation and democratic processes in choices about resource allocation for health care technologies. In support of this argument, four points are emphasized: (1) Most current biomedical ethical debates implicitly deal with economic issues of resource allocation. (2) Clinical decisions, which usually respect the Hippocratic code of ethics, are nevertheless influenced by economic incentives and constraints. (3) Economic assessment is concerned with both efficiency and equity and potential trade-offs between the two, which means that ethical judgements are always embedded in welfare economics. (4) The real debate is not between economics on the one side and medical ethics on the other. Rather it is between different ethical conceptions of social justice and the contrasting approaches they entail to reconciling individual interests and preferences with collective goods and welfare. This revised version was published online in August 2006 with corrections to the Cover Date.     

User charges and priority setting in health care: balancing equity and efficiency

User charges are the major source of finance for many health care systems. However, traditional approaches to health care priority setting, such as cost-effectiveness analysis, usually assume there are no user charges and therefore may ignore important implications for equity and efficiency. This paper therefore develops a rudimentary model of priority setting in which the fixed health care budget can be augmented by user charges. The paper uses methods analogous to models of optimal commodity taxation to develop a set of rules for the inclusion of a health technology in the subsidized health care package, and the calculation of its associated copayment rate. The results indicate that optimal levels of subsidy depend on the cost-effectiveness of the intervention, its price elasticity of demand, the epidemiology of the associated disease, and the policy maker's attitude towards equity. The model has important implications for policy making in three domains: health care priority setting, evaluation of health care technologies, and charging policy.     

Equity weights in the allocation of health care: the rank-dependent QALY model

This paper introduces the rank-dependent quality-adjusted life-years (QALY) model, a new method to aggregate QALYs in economic evaluations of health care. The rank-dependent QALY model permits the formalization of influential concepts of equity in the allocation of health care, such as the fair innings approach, and it includes as special cases many of the social welfare functions that have been proposed in the literature. An important advantage of the rank-dependent QALY model is that it offers a straightforward procedure to estimate equity weights for QALYs. We characterize the rank-dependent QALY model and argue that its central condition has normative appeal.     

Implications of spillover effects within the family for medical cost-effectiveness analysis

Medical cost-effectiveness analyses traditionally treat patients as isolated individuals and neglect the effects of improvement in patients' health on the welfare of their family members. We use a model based on a family utility function with altruistic linkages to show that there can be direct and indirect effects on the welfare of all family members. We focus specially on a model of how the spillover effects to the spouse in a two-person family might affect choice of treatments for prostate cancer. We then test the predictions of this model by analyzing treatment choices of prostate cancer patients using the linked SEER-Medicare database. We find that our results are consistent with the model's predictions. We conclude that cost-effectiveness analyses may better reflect the full costs and benefits of medical interventions if they incorporate these family effects. However, concerns about equity present a dilemma for the practice of CEA from the societal perspective.     

成本效果分析的理论基础

成本效果分析是医疗卫生领域内被广泛采用的评价技术，为资源配置决策与优选项目确定提供了强有力的实证支持。福利经济学被认为是成本效果分析的理论基础。福利经济学观点与超福利主义观点相结合则是现实的理论指导。对成本效果分析理论基础深入而全面地加以理解和把握，才能更好地运用该技术并理解所得结果的有效性与局限性。     

Cost-effectiveness of a supplementary class-based exercise program in the treatment of knee osteoarthritis

OBJECTIVES: The aim of this study was to assess the cost-effectiveness of a class-based exercise program supplementing a home-based program when compared with a home-based program alone. In addition, we estimated the probability that the supplementary class program is cost-effective over a range of values of a decision maker's willingness to pay for an additional quality-adjusted life-year (QALY). METHODS: The resource use and effectiveness data were collected as part of the clinical trial detailed elsewhere. Unit costs were estimated from published sources. The net benefit approach to cost-effectiveness analysis is used to estimate the probability of the intervention being cost-effective. RESULTS: The addition of a supplementary class-based group results in an increase in QALYs and lower costs. For all plausible values of a decision maker's willingness to pay for a QALY, the supplementary class group is likely to be cost-effective. CONCLUSIONS: The addition of a class-based exercise program is likely to be cost-effective and, on current evidence, should be implemented.     

Is it really possible to build a bridge between cost-benefit analysis and cost-effectiveness analysis?

Cost-benefit analysis (CBA) is a recognised as the economic evaluation technique that accords most with the underlying principles of standard welfare economic theory. However, due to problems associated with the technique, economists evaluating resources allocation decisions in health care have most often used cost-effective analysis (CEA), in which health benefits are expressed in non-monetary units. As a result, attempts have been made to build a welfare economic bridge between cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA). In this paper, we develops these attempts and finds that, while assumptions can be made to facilitate a constant willingness-to-pay per unit of health outcome, these restrictions are highly unrealistic. We develop an impossibility theorem that shows it is not possible to link CBA and CEA if: (i) the axioms of expected utility theory hold; (ii) the quality-adjusted life-year (QALY) model is valid in a welfare economic sense; and (iii) illness affects the ability to enjoy consumption. We conclude that, within a welfare economic framework, it would be unwise to rely on a link between CBA and CEA in economic evaluations.     

Generalised cost-effectiveness analysis: an aid to decision making in health

Health economics literature provides ample evidence for existing inefficiencies in health. Economic appraisal seeks to improve efficiency by guiding policy makers in how scarce resources can be used to derive the greatest possible social benefit. In the past many cost-effectiveness (CE) studies have addressed sector-wide cost-effectiveness in health. However, as described in this paper, current studies suffer from a number of shortcomings including the inability to assess the current mix of interventions, low generalisability and inconsistent methodological approaches. Most importantly, it is argued that the current incremental approach to cost-effectiveness analysis (CEA) does not provide decision makers with sufficient guidance for sector-wide priority setting in health. Instead, a broader complementary sectorial approach is proposed via the application of a generalised CEA framework, which allows the examination of existing inefficiencies in health systems. The wide variations in cost-effectiveness ratios observed among interventions that are currently in use, suggest there is considerable room to improve efficiency by moving from inefficient interventions to efficient interventions that are underutilized. This information will contribute to a more informed debate on resource allocation in the long-term.     

Welfare, QALYs, and costs - a comment

What costs and what effects should be included in cost‐effectiveness analysis from a welfare theoretic perspective? There is a broad agreement to include health‐care costs and to measure the effects as Quality‐Adjusted Life‐Years (QALYs). However, a hot topic has been how to handle survivor consumption and leisure foregone. It is well established that the costs for these aspects should be included only if their associated benefits are also included. The key question is, then, if these benefits are included in QALYs. In a recent paper by Nyman (Health Econ., in press) it was argued that these benefits are not generally included in the empirical assessment of QALYs and that these costs therefore should be excluded. Even if this recommendation is correct, the reasons for it can be questioned. It is here instead argued that this decision should be based on theoretical – and not empirical – considerations. Thus, these costs should be excluded because QALYs are unlikely to be consistent with a utility function also including consumption and leisure. If so, then it becomes more important to instruct individuals not to include these benefits in their QALY assessments than to consider to what extent they may or may not be implicitly included. It is also demonstrated that these results have bearings on non‐medical costs for the case when survival is not affected. Copyright © 2010 John Wiley & Sons, Ltd.     

Ends and means in public health policy in developing countries

International discussions of public health policy strategies in developing countries have been characterized by strong and conflicting positions. Differences regarding the means of health sector improvement can often be traced to differences about the ends, that is, the goals of the health sector. Three types of health sector goals are reviewed: health status improvement, equity and poverty alleviation, and individual welfare (utility) improvement. The paper argues that all three must be considered in developing health sector reform strategies in all countries. Highly normative policy positions often can be attributed a unidimensional affiliation with one health sector goal and denial of the relevance of the others. The current global interest in using cost-effectiveness analysis to set national health priorities is assessed in light of this eclectic approach. Examples are provided of how a health sector strategy based on cost-effectiveness would give sub-optimal solutions. These examples include situations where a private health care sector exists and provides some degree of substitution for publicly provided services; significantly high income elasticities exist for health care such that higher income beneficiaries may differentially capture public subsidies; and market failures exist in insurance. It is argued that these conditions are virtually universal in developing countries. Thus, rational policy development should explicitly consider multiple goals for the health sector.     

Accounting for the missing opportunity costs in incremental cost-outcome analysis

When used to assess the value for money of cost-increasing health care interventions, incremental cost-outcome analysis (i.e. cost-effectiveness and cost-utility analyses) overlooks potentially important opportunity costs. Consequently, a reliance on this method in practical decision making may serve to sustain otherwise avoidable inefficiencies. To mitigate this problem, a net quality adjusted life year (QALY) approach (or, more generally, a net outcome approach) to health economic evaluation is recommended. Moreover, existing empirical evidence in the experimental economics and psychology literature suggests that people will attach a disutility of significantly greater magnitude to outcomes that are perceived as losses, than the utility they attach to gains of the same absolute size. The net QALY approach ought to be modified to account for those circumstances where health outcomes may be valued differentially according to whether they are perceived as already 'owned', or as merely 'potential'. The importance of this modification is discussed here by way of example.     

Die Nutzung von Informationswertanalysen in Entscheidungen über angewandte Forschung

Public decision makers face demands to invest in applied research in order to accelerate the adoption of new genetic tests. However, such an investment is profitable only if the results gained from further investigations have a significant impact on health care practice. An upper limit for the value of additional information aimed at improving the basis for reimbursement decisions is given by the expected value of perfect information (EVPI). This study illustrates the significance of the concept of EVPI on the basis of a probabilistic cost-effectiveness model of screening for hereditary hemochromatosis among German men. In the present example, population-based screening can barely be recommended at threshold values of 50,000 or 100,000?Euro per life year gained and also the value of additional research which might cause this decision to be overturned is small: At the mentioned threshold values, the EVPI in the German public health care system was ca. 500,000 and 2,200,000?Euro, respectively. An analysis of EVPI by individual parameters or groups of parameters shows that additional research about adherence to preventive phlebotomy could potentially provide the highest benefit. The potential value of further research also depends on methodological assumptions regarding the decision maker's time horizon as well as on scenarios with an impact on the number of affected patients and the cost-effectiveness of screening.     

Market reforms in health care and sustainability of the welfare state: lessons from Sweden

Reforming health care systems which are predominantly publicly provided and financed has usually been motivated as a way of increasing efficiency even if it seldom is explicit whether it is in the official sense related to individual utility or in the unofficial sense related to health outcomes. In the case of Sweden the welfare state has been made politically sustainable through a construction where cash benefits and service provision are tailored to satisfy not only the basic needs but even the more discriminating needs of the middle classes. Their loyalty with the taxes is politically crucial and therefore their evaluation of the services in the welfarist sense equally important. That loyalty was however threatened in a situation where cost-containment policies were applied while equity principles were still a strong priority. Health care utilization was increasing among the very old and chronically ill while it was decreasing for other groups. The reforms introduced in some counties during the 1990s have been focussing on a purchaser-provider split and fee-for-service payment of providers. They have increased productivity sharply, increased utilization even among the groups that previously were 'pressed out' and reduced waiting lists. Increased efficiency however, threatens equity in some specific aspects. Fee-for-service payment means increased production and so far even increased costs. If they are to be met with increased private financing, rather than with present tax financing, it will bring the risk of inequities. Payment of hospitals through DRG systems means payment to providers for medical interventions with no incentives to deal with social consequences of illness. Inequities in health care can be related to the way health care deals with inequalities in health due to inequalities in living conditions or inequalities in living conditions due to ill health. In the short perspective the reforms may threaten equity in the second aspect, in the longer perspective the problems of cost control and the pressure it raises for alternative financial sources may be a more serious risk even for the former.