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Is there a kink in consumers' threshold value for cost‐effectiveness in health care?

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  • Bernie J. O'Brien
  • Kirsten Gertsen
  • Andrew R. Willan
  • A. Faulkner

Abstract

Background: A reproducible observation is that consumers' willingness‐to‐accept (WTA) monetary compensation to forgo a program is greater than their stated willingness‐to‐pay (WTP) for the same benefit. Several explanations exist, including the psychological principle that the utility of losses weighs heavier than gains. We sought to quantify the WTP–WTA disparity from published literature and explore implications for cost‐effectiveness analysis accept–reject thresholds in the south‐west quadrant of the cost‐effectiveness plane (less effect, less cost). Methods: We reviewed published studies (health and non‐health) to estimate the ratio of WTA to WTP for the same program benefit for each study and to determine if WTA is consistently greater than WTP in the literature. Results: WTA/WTP ratios were greater than unity for every study we reviewed. The ratios ranged from 3.2 to 89.4 for environmental studies (n=7), 1.9 to 6.4 for health care studies (n=2), 1.1 to 3.6 for safety studies (n=4) and 1.3 to 2.6 for experimental studies (n=7). Conclusions: Given that WTA is greater than WTP based on individual preferences, should not societal preferences used to determine cost‐effectiveness thresholds reflect this disparity? Current convention in cost‐effectiveness analysis is that any given accept–rejection criterion (e.g. $50 k/QALY gained) is symmetric – a straight line through the origin of the cost‐effectiveness plane. The WTA–WTP evidence suggests a downward ‘kink’ through the origin for the south‐west quadrant, such that the ‘selling price’ of a QALY is greater than the ‘buying price’. The possibility of ‘kinky cost‐effectiveness’ decision rules and the size of the kink merits further exploration. Copyright © 2002 John Wiley & Sons, Ltd.

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  • Bernie J. O'Brien & Kirsten Gertsen & Andrew R. Willan & A. Faulkner, 2002. "Is there a kink in consumers' threshold value for cost‐effectiveness in health care?," Health Economics, John Wiley & Sons, Ltd., vol. 11(2), pages 175-180, March.
    • Handle: RePEc:wly:hlthec:v:11:y:2002:i:2:p:175-180
    DOI: 10.1002/hec.655
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    2. Whynes, David K. & Sach, Tracey H., 2007. "WTP and WTA: Do people think differently?," Social Science & Medicine, Elsevier, vol. 65(5), pages 946-957, September.
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    5. Javad Moradpour & Aidan Hollis, 2021. "The economic theory of cost‐effectiveness thresholds in health: Domestic and international implications," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 1139-1151, May.
    6. A. Gafni & S. D. Walter & S. Birch & P. Sendi, 2008. "An opportunity cost approach to sample size calculation in cost‐effectiveness analysis," Health Economics, John Wiley & Sons, Ltd., vol. 17(1), pages 99-107, January.
    7. Gafni, Amiram & Birch, Stephen, 2006. "Incremental cost-effectiveness ratios (ICERs): The silence of the lambda," Social Science & Medicine, Elsevier, vol. 62(9), pages 2091-2100, May.
    8. Neil Hawkins & David A. Scott, 2011. "Reimbursement and value‐based pricing: stratified cost‐effectiveness analysis may not be the last word," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 688-698, June.
    9. Felix Achana & Stavros Petrou & Kamran Khan & Amadou Gaye & Neena Modi, 2018. "A methodological framework for assessing agreement between cost-effectiveness outcomes estimated using alternative sources of data on treatment costs and effects for trial-based economic evaluations," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(1), pages 75-86, January.
    10. Christian R. C. Kouakou & Thomas G. Poder, 2022. "Willingness to pay for a quality-adjusted life year: a systematic review with meta-regression," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(2), pages 277-299, March.
    11. Jesús Martín-Fernández & Gloria Ariza-Cardiel & Luz Mª Peña-Longobardo & Elena Polentinos-Castro & Juan Oliva-Moreno & Ana Isabel Gil-Lacruz & Héctor Medina-Palomino & Isabel del Cura-González, 2017. "“Gaining or losing”: The importance of the perspective in primary care health services valuation," PLOS ONE, Public Library of Science, vol. 12(12), pages 1-14, December.
    12. Jack Dowie, 2004. "Why cost‐effectiveness should trump (clinical) effectiveness: the ethical economics of the South West quadrant," Health Economics, John Wiley & Sons, Ltd., vol. 13(5), pages 453-459, May.
    13. Adam Zydroń & Krzysztof Szoszkiewicz & Cyprian Chwiałkowski, 2021. "Valuing Protected Areas: Socioeconomic Determinants of the Willingness to Pay for the National Park," Sustainability, MDPI, vol. 13(2), pages 1-11, January.
    14. Pedram Sendi, 2021. "Dealing with Bad Risk in Cost-Effectiveness Analysis: The Cost-Effectiveness Risk-Aversion Curve," PharmacoEconomics, Springer, vol. 39(2), pages 161-169, February.
    15. Suijkerbuijk, Anita W.M. & Over, Eelco A.B. & van Aar, Fleur & Götz, Hannelore M. & van Benthem, Birgit H.B. & Lugnér, Anna K., 2018. "Consequences of restricted STI testing for young heterosexuals in the Netherlands on test costs and QALY losses," Health Policy, Elsevier, vol. 122(2), pages 198-203.
    16. Simon Eckermann, 2015. "Kinky Thresholds Revisited: Opportunity Costs Differ in the NE and SW Quadrants," Applied Health Economics and Health Policy, Springer, vol. 13(1), pages 7-13, February.
    17. Powdthavee, Nattavudh & van den Berg, Bernard, 2011. "Putting different price tags on the same health condition: Re-evaluating the well-being valuation approach," Journal of Health Economics, Elsevier, vol. 30(5), pages 1032-1043.
    18. Steven Alberts & Tiffany Yu & Robert Behrens & Lindsay Renfro & Geetika Srivastava & Gamini Soori & Shaker Dakhil & Rex Mowat & John Kuebler & George Kim & Miroslaw Mazurczak & John Hornberger, 2014. "Comparative Economics of a 12-Gene Assay for Predicting Risk of Recurrence in Stage II Colon Cancer," PharmacoEconomics, Springer, vol. 32(12), pages 1231-1243, December.
    19. Nancy Devlin & David Parkin, 2004. "Does NICE have a cost‐effectiveness threshold and what other factors influence its decisions? A binary choice analysis," Health Economics, John Wiley & Sons, Ltd., vol. 13(5), pages 437-452, May.

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