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A utility-theoretic model for QALYs and willingness to pay

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  • Thomas Klose

    (Department of Health Economics, University of Ulm, Germany)

Abstract

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.

Suggested Citation

  • Thomas Klose, 2003. "A utility-theoretic model for QALYs and willingness to pay," Health Economics, John Wiley & Sons, Ltd., vol. 12(1), pages 17-31.
  • Handle: RePEc:wly:hlthec:v:12:y:2003:i:1:p:17-31 DOI: 10.1002/hec.697
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    References listed on IDEAS

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    Cited by:

    1. Thomas Hammerschmidt & Hans-Peter Zeitler & Reiner Leidl, 2004. "A utility-theoretic approach to the aggregation of willingness to pay measured in decomposed scenarios: development and empirical test," Health Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 345-361.
    2. George Van Houtven & John Powers & Amber Jessup & Jui-Chen Yang, 2006. "Valuing avoided morbidity using meta-regression analysis: what can health status measures and QALYs tell us about WTP?," Health Economics, John Wiley & Sons, Ltd., vol. 15(8), pages 775-795.
    3. Somayeh Sadat & Hossein Abouee-Mehrizi & Michael Carter, 2015. "Can hospitals compete on quality?," Health Care Management Science, Springer, pages 376-388.
    4. José-María Abellán-Perpiñán & José-Luis Pinto-Prades & Ildefonso Méndez-Martínez & Xabier Badía-Llach, 2006. "Towards a better QALY model," Health Economics, John Wiley & Sons, Ltd., vol. 15(7), pages 665-676.

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