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Implications of Basing Health Care Resource Allocations on Cost-utility Analysis in the Presence of Externalities

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  • R Labelle
  • J Hurley

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.

Suggested Citation

  • R Labelle & J Hurley, 1991. "Implications of Basing Health Care Resource Allocations on Cost-utility Analysis in the Presence of Externalities," Centre for Health Economics and Policy Analysis Working Paper Series 1991-03, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
    • Handle: RePEc:hpa:wpaper:199103
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    1. 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.
    2. 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, February.
    3. Sandy Tubeuf & Eirini-Christina Saloniki & David Cottrell, 2019. "Parental Health Spillover in Cost-Effectiveness Analysis: Evidence from Self-Harming Adolescents in England," PharmacoEconomics, Springer, vol. 37(4), pages 513-530, April.
    4. Mark Blaug, 1998. "Where are we now in British health economics?," Health Economics, John Wiley & Sons, Ltd., vol. 7(S1), pages 63-78, August.
    5. 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.
    6. Christel Protière & Nora Moumjid & Anne-Deborah Bouhnik & Anne Gaëlle Le Corroller Soriano & Jean Paul Moatti, 2012. "Heterogeneity of Cancer Patient Information-Seeking Behaviors," Medical Decision Making, , vol. 32(2), pages 362-375, March.
    7. 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: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 61(1), pages 97-120, January.
    8. 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.
    9. Jack Dowie, 1998. "Towards the equitably efficient and transparently decidable use of public funds in the deep blue millennium," Health Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 93-103, March.
    10. Hareth Al-Janabi & Job van Exel & Werner Brouwer & Joanna Coast, 2016. "A Framework for Including Family Health Spillovers in Economic Evaluation," Medical Decision Making, , vol. 36(2), pages 176-186, February.
    11. 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.
    12. Hurley, Jeremiah & Mentzakis, Emmanouil, 2013. "Health-related externalities: Evidence from a choice experiment," Journal of Health Economics, Elsevier, vol. 32(4), pages 671-681.
    13. Wim Groot & Henriëtte 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, September.
    14. McNamee, Paul & Mendolia, Silvia, 2014. "The effect of chronic pain on life satisfaction: Evidence from Australian data," Social Science & Medicine, Elsevier, vol. 121(C), pages 65-73.
    15. Calcott, Paul, 2000. "Health care evaluation, utilitarianism and distortionary taxes," Journal of Health Economics, Elsevier, vol. 19(5), pages 719-730, September.
    16. Hareth Al-Janabi & Terry Flynn & Joanna Coast, 2011. "QALYs and Carers," PharmacoEconomics, Springer, vol. 29(12), pages 1015-1023, December.

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