A utility-theoretic model for QALYs and willingness to pay
Despite the widespread use of quality-adjusted life years (QALY) in economic evaluation studies, their utility-theoretic foundation remains unclear. A model for preferences over health, money, and time is presented in this paper. Under the usual assumptions of the original QALY-model, an additive separable presentation of the utilities in different periods exists. In contrast to the usual assumption that QALY-weights do solely depend on aspects of health-related quality of life, wealth-standardized QALY-weights might vary with the wealth level in the presented extension of the original QALY-model resulting in an inconsistent measurement of QALYs. Further assumptions are presented to make the measurement of QALYs consistent with lifetime preferences over health and money. Even under these strict assumptions, QALYs and WTP (which also can be defined in this utility-theoretic model) are not equivalent preference-based measures of the effects of health technologies on an individual level. The results suggest that the individual WTP per QALY can depend on the magnitude of the QALY-gain as well as on the disease burden, when health influences the marginal utility of wealth. Further research seems to be indicated on this structural aspect of preferences over health and wealth and to quantify its impact. Copyright © 2002 John Wiley & Sons, Ltd.
Volume (Year): 12 (2003)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Johansson,Per-Olov, 1995. "Evaluating Health Risks," Cambridge Books, Cambridge University Press, number 9780521478786, February.
- 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.
- Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
- S Georgiou & I H Langford & I J Bateman & R K Turner, 1998.
"Determinants of individuals' willingness to pay for perceived reductions in environmental health risks: a case study of bathing water quality,"
Environment and Planning A,
Pion Ltd, London, vol. 30(4), pages 577-594, April.
- S Georgiou & I H Langford & I J Bateman & R K Turner, 1998. "Determinants of Individuals' Willingness to Pay for Perceived Reductions in Environmental Health Risks: A Case Study of Bathing Water Quality," Environment and Planning A, , vol. 30(4), pages 577-594, April.
- Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1.
- Keeney,Ralph L. & Raiffa,Howard, 1993. "Decisions with Multiple Objectives," Cambridge Books, Cambridge University Press, number 9780521438834, February.
- Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
- Charles Blackorby & David Donaldson & David Moloney, 1984. "Consumer's Surplus and Welfare Change in a Simple Dynamic Model," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 171-176.
- Evans, William N & Viscusi, W Kip, 1991. "Estimation of State-Dependent Utility Functions Using Survey Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 94-104, February.
- Orazio Attanasio & James Banks, 1998. "Trends in household saving don't justify tax incentives to boost saving," Economic Policy, CEPR;CES;MSH, vol. 13(27), pages 547-583, October.
- Johannesson, Magnus, 1996. "A note on the relationship between ex ante and expected willingness to pay for health care," Social Science & Medicine, Elsevier, vol. 42(3), pages 305-311, February.
- David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc.
- Culyer, A J, 1989. "The Normative Economics of Health Care Finance and Provision," Oxford Review of Economic Policy, Oxford University Press, vol. 5(1), pages 34-58, Spring.
- Klose, Thomas, 1999. "The contingent valuation method in health care," Health Policy, Elsevier, vol. 47(2), pages 97-123, May.
- Keen, Michael, 1990. "Welfare analysis and intertemporal substitution," Journal of Public Economics, Elsevier, vol. 42(1), pages 47-66, June.
- Johansson,Per-Olov, 1995. "Evaluating Health Risks," Cambridge Books, Cambridge University Press, number 9780521472852, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wly:hlthec:v:12:y:2003:i:1:p:17-31. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.