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Optimal allocation of resources over health care programmes: dealing with decreasing marginal utility and uncertainty

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  • Maiwenn J. Al
  • Talitha L. Feenstra
  • Ben A. van Hout

Abstract

This paper addresses the problem of how to value health care programmes with different ratios of costs to effects, specifically when taking into account that these costs and effects are uncertain. First, the traditional framework of maximising health effects with a given health care budget is extended to a flexible budget using a value function over money and health effects. Second, uncertainty surrounding costs and effects is included in the model using expected utility. Other approaches to uncertainty that do not specify a utility function are discussed and it is argued that these also include implicit notions about risk attitude. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • Maiwenn J. Al & Talitha L. Feenstra & Ben A. van Hout, 2005. "Optimal allocation of resources over health care programmes: dealing with decreasing marginal utility and uncertainty," Health Economics, John Wiley & Sons, Ltd., vol. 14(7), pages 655-667, July.
  • Handle: RePEc:wly:hlthec:v:14:y:2005:i:7:p:655-667
    DOI: 10.1002/hec.973
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    File URL: https://doi.org/10.1002/hec.973
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    References listed on IDEAS

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    1. Weinstein, Milton & Zeckhauser, Richard, 1973. "Critical ratios and efficient allocation," Journal of Public Economics, Elsevier, vol. 2(2), pages 147-157, April.
    2. Birch, Stephen & Donaldson, Cam, 1987. "Applications of cost-benefit analysis to health care : Departures from welfare economic theory," Journal of Health Economics, Elsevier, vol. 6(3), pages 211-225, September.
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    4. Joshua Graff Zivin, 2001. "Cost‐effectiveness analysis with risk aversion," Health Economics, John Wiley & Sons, Ltd., vol. 10(6), pages 499-508, September.
    5. Keeney,Ralph L. & Raiffa,Howard, 1993. "Decisions with Multiple Objectives," Cambridge Books, Cambridge University Press, number 9780521438834, December.
    6. Ben-Zion, Uri & Gafni, Amiram, 1983. "Evaluation of public investment in health care : Is the risk irrelevant?," Journal of Health Economics, Elsevier, vol. 2(2), pages 161-165, August.
    7. Eugene M. Laska & Morris Meisner & Carole Siegel, 1997. "Statistical Inference for Cost–Effectiveness Ratios," Health Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 229-242, May.
    8. Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-378, June.
    9. Raymond C.W. Hutubessy & Rob M.P.M. Baltussen & David B. Evans & Jan J. Barendregt & Christopher J.L. Murray, 2001. "Stochastic league tables: communicating cost‐effectiveness results to decision‐makers," Health Economics, John Wiley & Sons, Ltd., vol. 10(5), pages 473-477, July.
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    Citations

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    Cited by:

    1. Pieter H. M. van Baal & Talitha L. Feenstra & Rudolf T. Hoogenveen & G. Ardine de Wit & Werner B. F. Brouwer, 2007. "Unrelated medical care in life years gained and the cost utility of primary prevention: in search of a ‘perfect’ cost–utility ratio," Health Economics, John Wiley & Sons, Ltd., vol. 16(4), pages 421-433, April.
    2. Gandjour, Afschin & Chernyak, Nadja, 2011. "A new prize system for drug innovation," Health Policy, Elsevier, vol. 102(2), pages 170-177.
    3. Afschin Gandjour, 2015. "Comment on: “Healthy Decisions: Towards Uncertainty Tolerance in Healthcare Policy”," PharmacoEconomics, Springer, vol. 33(9), pages 981-982, September.
    4. Sanjay Mehrotra & Kibaek Kim, 2011. "Outcome based state budget allocation for diabetes prevention programs using multi-criteria optimization with robust weights," Health Care Management Science, Springer, vol. 14(4), pages 324-337, November.
    5. Angelis, Aris & Kanavos, Panos, 2017. "Multiple Criteria Decision Analysis (MCDA) for evaluating new medicines in Health Technology Assessment and beyond: The Advance Value Framework," Social Science & Medicine, Elsevier, vol. 188(C), pages 137-156.
    6. Sergey S. Rabotyagov, 2010. "Ecosystem Services under Benefit and Cost Uncertainty: An Application to Soil Carbon Sequestration," Land Economics, University of Wisconsin Press, vol. 86(4), pages 668-686.
    7. Douwe Postmus & Tommi Tervonen & Gert Valkenhoef & Hans Hillege & Erik Buskens, 2014. "A multi-criteria decision analysis perspective on the health economic evaluation of medical interventions," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(7), pages 709-716, September.
    8. Chalabi, Zaid & Epstein, David & McKenna, Claire & Claxton, Karl, 2008. "Uncertainty and value of information when allocating resources within and between healthcare programmes," European Journal of Operational Research, Elsevier, vol. 191(2), pages 530-539, December.

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