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Longevity bias in cost-effectiveness analysis

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Author Info
Liqun Liu (Private Enterprise Research Center, Texas A&M University, College Station, TX, USA)
Andrew J. Rettenmaier (Private Enterprise Research Center, Texas A&M University, College Station, TX, USA)
Thomas R. Saving (Private Enterprise Research Center, Texas A&M University, College Station, TX, USA)
Abstract

We use a simple lifetime utility maximization model to study the problem of medical resource allocation. This model leads to a welfare specification with a QALY (quality-adjusted life-year) component that captures an individual's preferences over both life expectancy and health status. The goal of medical cost-effectiveness analysis (CEA) is characterized as maximizing the QALY measure for a given total medical expenditure. We show that the CEA with such a goal has a longevity bias: the CEA-based division of a given total medical expenditure between extending life and improving health gives the former a larger share than is called for by welfare maximization. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1309
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 17 (2008)
Issue (Month): 4 ()
Pages: 523-534
Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Handle: RePEc:wly:hlthec:v:17:y:2008:i:4:p:523-534

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  1. John A. Nyman, 2004. "Should the consumption of survivors be included as a cost in cost-utility analysis?," Health Economics, John Wiley & Sons, Ltd., vol. 13(5), pages 417-427. [Downloadable!]
  2. Dolan, Paul, 2000. "The measurement of health-related quality of life for use in resource allocation decisions in health care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 32, pages 1723-1760 Elsevier. [Downloadable!] (restricted)
  3. William H. Dow & Tomas J. Philipson & Xavier Sala-i-Martin, 1999. "Longevity Complementarities under Competing Risks," American Economic Review, American Economic Association, vol. 89(5), pages 1358-1371, December. [Downloadable!] (restricted)
  4. Bleichrodt, Han, 1997. "Health utility indices and equity considerations," Journal of Health Economics, Elsevier, vol. 16(1), pages 65-91, February. [Downloadable!] (restricted)
  5. Bleichrodt, Han & Wakker, Peter & Johannesson, Magnus, 1997. "Characterizing QALYs by Risk Neutrality," Journal of Risk and Uncertainty, Springer, vol. 15(2), pages 107-14, November. [Downloadable!] (restricted)
  6. Cam Donaldson & Stephen Birch & Amiram Gafni, 2002. "The distribution problem in economic evaluation: income and the valuation of costs and consequences of health care programmes," Health Economics, John Wiley & Sons, Ltd., vol. 11(1), pages 55-70. [Downloadable!]
  7. Liqun Liu & Andrew Rettenmaier & Thomas Saving, 2006. "Indirect Costs and Discounting in Health Care Decision-Making: The Role of Distortionary Taxation," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 5(1), pages 1512-1512. [Downloadable!] (restricted)
  8. David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Culyer, A. J. & Wagstaff, Adam, 1993. "Equity and equality in health and health care," Journal of Health Economics, Elsevier, vol. 12(4), pages 431-457, December. [Downloadable!] (restricted)
  10. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June. [Downloadable!] (restricted)
  11. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February. [Downloadable!] (restricted)
  12. Bleichrodt, Han & Quiggin, John, 2002. "Life-cycle preferences over consumption and health: a reply to Klose," Journal of Health Economics, Elsevier, vol. 21(1), pages 167-168, January. [Downloadable!] (restricted)
  13. Bleichrodt, Han & Quiggin, John, 1999. "Life-cycle preferences over consumption and health: when is cost-effectiveness analysis equivalent to cost-benefit analysis?," Journal of Health Economics, Elsevier, vol. 18(6), pages 681-708, December. [Downloadable!] (restricted)
  14. Garber, Alan M. & Phelps, Charles E., 1997. "Economic foundations of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 1-31, February. [Downloadable!] (restricted)
  15. Johannesson, Magnus & Weinstein, Milton C., 1993. "On the decision rules of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 12(4), pages 459-467, December. [Downloadable!] (restricted)
  16. Dolan, Paul & Edlin, Richard, 2002. "Is it really possible to build a bridge between cost-benefit analysis and cost-effectiveness analysis?," Journal of Health Economics, Elsevier, vol. 21(5), pages 827-843, September. [Downloadable!] (restricted)
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