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A utility-theoretic model for QALYs and willingness to pay

  • Thomas Klose

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

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    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.

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    File URL: http://hdl.handle.net/10.1002/hec.697
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    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 12 (2003)
    Issue (Month): 1 ()
    Pages: 17-31

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    Handle: RePEc:wly:hlthec:v:12:y:2003:i:1:p:17-31
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    8. David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc.
    9. 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.
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