Health technology assessment with risk aversion in health |
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| Affiliation: | 1. Quintiles Professor of Pharmaceutical Development and Regulatory Innovation, School of Pharmacy, Price School of Public Policy, Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, Los Angeles, CA. 635 Downey Way, VPD 414K, Los Angeles, CA 90089-3333, USA;2. National Bureau of Economic Research, Cambridge, MA, USA;3. University Professor and Provost Emeritus, University of Rochester, Rochester, NY, 30250 South Highway One, Gualala, CA 95445, USA;1. iBMG, Erasmus University, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands;2. iBMG, Erasmus University, Rotterdam, The Netherlands;3. CREM, University of Rennes 1, Rennes, France;4. Department of Economics, University of Navarra, Pamplona, Spain;5. Yunus Centre for Social Business & Health, Glasgow Caledonian University, Glasgow, UK;1. The Comparative Health Outcome, Policy, and Economics Institute, University of Washington, Seattle, WA, USA;2. Flatiron Health, New York, NY, USA;2. Boston College, Economics Department, Maloney Hall, 140 Commonwealth Avenue, Chestnut Hill, MA, 02467, United States |
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| Abstract: | Standard cost-effectiveness models compare incremental cost increases to incremental average gains in health, commonly expressed in Quality-Adjusted Life Years (QALYs). Our research generalizes earlier models in several ways. We introduce risk aversion in Quality of Life (QoL), which leads to “willingness-to-pay” thresholds that rise with illness severity, potentially by an order of magnitude. Unlike traditional CEA analyses, which discriminate against persons with disabilities, our analysis implies that the marginal value of improving QoL rises for disabled individuals. Our model can also value the uncertain benefits of medical interventions by employing well-established analytic methods from finance. Finally, we show that traditional QALYs no longer serve as a single index of health, when consumers are risk-averse. To address this problem, we derive a generalized single-index of health outcomes—the Generalized Risk-Adjusted QALY (GRA-QALY). Earlier models of CEA that abstract from risk-aversion nest as special cases of our more general model. |
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| Keywords: | Cost-effectiveness Health technology assessment Risk and uncertainty Quality-Adjusted life-year |
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