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Implications of basing health-care resource allocations on cost-utility analysis in the presence of externalities

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  • Labelle, Roberta J.
  • Hurley, Jeremiah E.

Abstract

The application of economic evaluation methods to the analysis of health care services and programs has grown steadily over the past two decades. One form of economic analysis in particular - cost utility analysis (CUA) - is receiving considerable attention from researchers and policy makers. Although CUA was originally applied primarily as a technique for choosing among treatment options for a defined disease or patient population, it is now increasingly being advocated as a tool for helping to establish funding priorities across a wide variety of health care programs and potential beneficiaries. In this paper we argue that CUA, as currently applied, is insufficient for providing information on allocative efficiency because it excludes externalities, a potentially significant source of societal utility (and disutility). The exclusion of externalities may bias the priority ranking of programs in unpredictable ways and ultimately lead to a systematic non-optimal allocation of health care resources.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 11 (1992)
Issue (Month): 3 (October)
Pages: 259-277

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Handle: RePEc:eee:jhecon:v:11:y:1992:i:3:p:259-277

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Web page: http://www.elsevier.com/locate/inca/505560

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Cited by:
  1. Hurley, Jeremiah & Mentzakis, Emmanouil, 2013. "Health-related externalities: Evidence from a choice experiment," Journal of Health Economics, Elsevier, vol. 32(4), pages 671-681.
  2. Wim Groot & Henri�tte Maassen van den Brink & Erik Plug, 2004. "Money for health: the equivalent variation of cardiovascular diseases," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 859-872.
  3. Paul Dolan & Rebecca Shaw & Aki Tsuchiya & Alan Williams, 2005. "QALY maximisation and people's preferences: a methodological review of the literature," Health Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 197-208.
  4. Hareth Al-Janabi & Terry Flynn & Joanna Coast, 2011. "QALYs and Carers," PharmacoEconomics, Springer, vol. 29(12), pages 1015-1023, December.
  5. Bleichrodt, Han & Johannesson, Magnus, 1997. "Standard gamble, time trade-off and rating scale: Experimental results on the ranking properties of QALYs," Journal of Health Economics, Elsevier, vol. 16(2), pages 155-175, April.
  6. van der Star, Sanne M. & van den Berg, Bernard, 2011. "Individual responsibility and health-risk behaviour: A contingent valuation study from the ex ante societal perspective," Health Policy, Elsevier, vol. 101(3), pages 300-311, August.
  7. Brisson, M. & Edmunds, J., 2004. "Valuing the benefit of varicella vaccination: comparison of willingness to pay and quality-adjusted life-years," Working Papers 04/02, Department of Economics, City University London.
  8. Calcott, Paul, 2000. "Health care evaluation, utilitarianism and distortionary taxes," Journal of Health Economics, Elsevier, vol. 19(5), pages 719-730, September.
  9. Jacobsson, Fredric & Carstensen, John & Borgquist, Lars, 2005. "Caring externalities in health economic evaluation: how are they related to severity of illness?," Health Policy, Elsevier, vol. 73(2), pages 172-182, August.
  10. Wim Groot & Henriëtte van den Brink, 2003. "Sympathy and the Value of Health: The Spill-over Effects of Migraine on Household Well-being," Social Indicators Research, Springer, vol. 61(1), pages 97-120, January.

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