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Cost-utility analysis and varying preferences for health
ELSEVIER
Health
Policy
41 (1997)
201-205
A Second Opinion
Cost-utility analysis and varying preferences for health Johannesson and O’Conor [l] argue a number of points in the way in which cost-utility analysis is and might be used in priority setting in health care. While there are several of these which we might want to debate with them, we will concentrate here on what we see as the central theme of their paper. This is the notion of a ‘constant price per QALY gained’. We feel that some (but not all) of the arguments presented in support of this notion reflect a more general thinking in health economies with respect to assuming that a QALY is a QALY is a QALY. Consequently, some of the issues we raise have wider relevance. First, the authors state: ‘to use cost-utility analysis for societal decisions, all the costs have to be included in the analysis’. We would agree that economic evaluation aimed at some societal decision making should include all costs no matter on whom they fall-in this context it does not matter whether they fall on the health service budget or not. Cost-utility analysis, however, based as it is only on the output side QALYs, is inappropriate for such societal decision making. The opportunity costs of patient time (which Johannesson and O’Conor want included in societal costs) have to be considered in terms of benefits foregone, which are much wider than simply health. If patients sit in a GP’s waiting room they may do so at the expense of seeing their favourite television program. Cost-utility analysis when used in priority setting across different programmes cannot cope legitimately with that [2] since on the benefit side all that is included are QALYs. Certainly, if these non-health service costs were constant per QALY across different programmes then in the context of deciding how best to allocate additional health service resources across different competing programmes, this particular problem would disappear. This constancy, however, is most unlikely to apply in practice. Secondly, Johannesson and O’Conor argue that ‘[i]f all the costs (i.e. not just health service costs) are included in a cost-utility analysis, the difference between cost-utility analysis and cost benefit analysis is that the willingness to pay per QALY gained is constant and the same for everyone in cost-utility analysis’. This 0168~8510/97/$17.00 PIISO168-8510(97)00032-8
0
1997 Elsevier
Science
Ireland
Ltd.
All
rights
reserved
202
A Second
Opinion
1 Health
Policy
41 (1997)
201--205
however is only a part of the story of the difference. Additionally, cost-utility analysis only includes (indeed can only include) health benefits while cost-benefit analysis is not restricted in this way. There is growing evidence that the benefits of health care are not restricted to health benefits [3-51. The extent too to which cost-utility analysis incorporates externalities is normally more limited than in cost-benefit analysis. Thirdly, these authors suggest that: ‘One argument for using a constant price per QALY gained is that variations in the willingness to pay per QALY gained merely reflect difference in the marginal utility of income.’ They add: ‘This would be the case if QALYs are a measure of individual utility that can be aggregated into a measure of social utility (welfare).’ The authors themselves however note earlier in the paper that this would require a set of highly restrictive assumptions and as such present no real case in this instance for supporting the constant price per QALY decision rule. Additionally, there is here (and indeed throughout the article) in our view a problem in the authors’ use of the expression ‘price per QALY’. They appear to equate price with willingness to pay. There seems to be a confusion here between price and value. Fourthly, Johannesson and O’Conor argue that: ‘Even if QALYs do not provide a measure of utility, it could be argued that it is better to use a constant willingness to pay per QALY rather than let the willingness to pay per QALY vary according to a cost-benefit analysis’. Rightly in our view they go on to say that this depends on ‘both differences in the marginal of income and dzfferences in the marginal utility of QALYs’ (emphasis added). The authors then defend a constant willingness to pay per QALY on the grounds that ‘the willingness to pay should be adjusted for differences in the marginal utility of income’. They thus ignore their own (in our view valid) point that the marginal utility of QALYs may vary from individual to individual! Finally, they claim on the basis of the above points that ‘it is possible to make a coherent argument in favour of using a constant willingness to pay per QALY gained in economic evaluations of health care’. We would dispute that they have succeeded in this. To adopt a constant social value per QALY gained (and we would suggest that it is the appropriate issue rather than price and that, perhaps unfortunately, for reasons we spelt out above the costs have to be restricted to health service costs), there is a need for two further conditions: (1) (a) Individuals’ preferences for QALYs are assumed to be constant or (b) society imposes a view that the allocation of health service funds ought not to take account of variations in individuals’ preferences for our own health. (2) Society argues that no distinction should be drawn (irrespective of (1) above) in allocating health gains or QALYs gained to different groups, i.e. that the social value of a health gain should not depend on such factors as age, socio-economic status, existing health state, etc. There is already some evidence that the assumption in l(a) does not hold [6,7] and the condition (2) is also open to question [8-lo]. Together with a colleague we have begun research into the second issue. We have some evidence that at least
A Second
Opinion
/Health
Policy
41 (1997)
201-205
203
among health service decision makers, they would want to distinguish between health gains accruing to different social groups [l 11. In as yet unpublished work, we also have limited evidence that the cardinal weights here for health gains to different groups may be quite substantially different from 1, for example for different socio-economic groups or because of variations in existing health status. It is these two assumptions that need to be investigated and tested further, especially from the perspective of society’s preferences. Gavin Mooney and Stephen Jan
Department
of Public Health and Community Medicine University of Sydney Sydney Australia
References [l] Johannesson M, O’Conor RM, Cost-utility analysis from a societal perspective. Health Policy 1997;39:241-253. [2] Gerard K, Mooney G. QALY league tables; handle with care. Health Economics 1993;2:59964. [3] Mooney G, Lange M. Antenatal screening: what constitutes ‘benefit’? Social Science and Medicine 1993;37:873-878. [4] Ryan M. Economics and the patient’s utility function: An application to assisted reproductive techniques. Ph.D Thesis, the University of Aberdeen, Aberdeen, 1995. [5] Berwick DM, Weinstein MC. What do patients value? Willingness to pay for ultrasound in normal pregnancy. Medical Care 1985;23:881-93. [6] Sackett DL, Torrance GW. The utility of different health states as perceived by the general public. Journal of Chronic Diseases 1978;31:6977704. [7] Froberg DG, Kane RL. Methodology for measuring health-state preferences-III Population and context effects. Journal of Clinical Epidemiology 1989;42:5855592. [8] Williams A. Ethics and efficiency in the provision of health care. In: Bell JM, Mendes S, editors. Philosophy and Medical Welfare, Cambridge University Press, Cambridge, 1988. [9] Nord E, Richardson J, Street A, Kuhse H, Singer P. Maximising health benefits versus egalitarianism: An Australian survey of health issues. Social Science and Medicine 1995;41:1429- 1437. [IO] Nord E. Health status index models for use in resource allocation decision. A critical review in the light of observed preferences for social choice. International Journal of Technology Assessment in Health Care 1996;12:31~44. [II] Mooney G, Jan S, Wiseman V. Examining preferences for allocating health gains. Health Care Analysis 1995;3:231-234.
The
authors respond
While we appreciate the attention given to our paper by Mooney and Jan, we feel that they have misunderstood our intention to clarify the differences between cost-benefit analysis and cost-utility analysis. The most important objection proposed by Mooney and Jan is summed up in their introductory paragraph in which they state that we are ‘assuming that a QALY is a QALY is a QALY’. They present some empirical evidence opposed to this view and propose certain addi-
204
A Second
Opinion/Health
Policy
41 (1997)
201-205
tional ‘conditions’ which would need to be met for such an assumption to hold. Mooney and Jan also make some minor technical objections which we will also address. First of all, the two ‘further conditions’ proposed by Mooney and Jan are subsumed within our explicit assumptions regarding the use of QALYs as a measure of social welfare (p. 246). Mooney and Jan argue that they have some empirical evidence that the social value of QALYs varies between, i.e. socioeconomic groups. In principle it would of course be possible to give QALYs gained in different groups different weights, although it is not clear how to establish these weights. The difficulty of aggregating individual preferences into an overall expression of social welfare is the basis for an entire literature on welfare economics (for instance, see Boadway and Bruce [l]) beginning with Arrow’s [2] classic work. The issue on how to aggregate QALYs into a measure of social welfare is an important topic for further work in this area. Furthermore, Mooney and Jan claim that, in proposing the use of a constant price per QALY decision rule, we ignore our own point that, for the case where QALYs are considered only as a measure of health and not as a measure of utility, the marginal utility of QALYs may vary from individual to individual. In fact rather than ignore it, we explicitly acknowledge and discuss this issue in a section of our paper. In Mooney and Jan’s discussion of this section of our paper however, they revert to arguments which apply only in the case where QUALYs are considered as a measure of utility. Thus, there is a fundamental confusion over the nature of QALYs which underlies their arguments. Mooney and Jan also argue that cost-utility analysis cannot be used for societal decision-making since some of the costs of health care programmes ‘have to be considered in terms of benefits foregone which are much wider than simply health’. This argument is simply erroneous. Regardless of whether cost-utility analysis or cost-benefit analysis is carried out, costs should be estimated as the opportunity costs of the treatment (i.e. the value of the benefits foregone), in which case there is no difference between the costs of patient time and other resources used to produce better health. In a related argument, Mooney and Jan suggest that cost-utility analysis cannot incorporate non-health benefits. However, if a health care programme yields non-health benefits, these can simply be included among the costs (i.e. they will reduce the net costs). This is in principle no different from including savings in health care costs in the net costs of a health care programme. As long as these additional benefits can be quantified it is straightforward to include them in a cost-utility analysis (and the problem of quantifying some costs and benefits is the same for both cost-utility analysis and cost-benefit analysis). Lastly, Mooney and Jan quibble with our use of the expression ‘constant price per QALY’ and argue that the term ‘constant value’ should be used instead. It should be clear that whether we refer to ‘constant price’, ‘constant value’ or ‘constant willingness to pay’ is of no importance to our arguments. A constant price per QALY gained obviously implies a constant value.
A Second
Opinion
/Health
Policy
41 (1997)
201-205
205
Our article was an effort toward narrowing the gap between proponents of cost-utility analysis on the one hand and cost-benefit analysis on the other. Both types of analysis are currently practised and it seems a productive avenue of research to clarify the differences between them and to look for ways to reconcile the approaches in practical as well as theoretical terms. It is clearly stated in our article (p. 251) that our purpose was not to argue that using a constant cost per QALY gained is necessarily to be preferred to a pure cost-benefit analysis approach (where the willingness to pay per QALY gained is allowed to vary), but was instead to outline the arguments that could be used in favour of using a constant per QALY gained. In contrast to Mooney and Jan, we think it is possible to make a coherent argument in favour of using a constant willingness to pay per QALY gained, although further work is needed to conclude if this model is to be preferred to a pure cost-benefit approach. In conclusion, we would point out that this effort is not limited to the debate over QALYs, but is part of a larger area of research in welfare economics. For instance, Pratt and Zeckhauser [3] recently concluded in a formal analysis that if wealth does not differ between individuals we should use a constant price per statistical life saved to assess lifesaving programmes. In our view, their analysis provides the strongest theoretical foundation for cost-effectiveness (and cost-utility) analysis presented so far. Magnus Johannesson and Richard M. O’Conor Centre for Health Economics Stockholm School of Economics Stockholm Sweden
References [I] Broadway RW, Bruce N, Welfare Economics, Blackwell, Oxford, 1984. [2] Arrow KJ, Social Choice and Individual Values, Yale University Press, New Haven, 1951. [3] Pratt JW, Zeckhauser RJ, Willingness to pay and the distributions of risk and wealth. Journal of Political Economy 1996;104:747-63.
Health
Policy
41 (1997)
201-205
A Second Opinion
Cost-utility analysis and varying preferences for health Johannesson and O’Conor [l] argue a number of points in the way in which cost-utility analysis is and might be used in priority setting in health care. While there are several of these which we might want to debate with them, we will concentrate here on what we see as the central theme of their paper. This is the notion of a ‘constant price per QALY gained’. We feel that some (but not all) of the arguments presented in support of this notion reflect a more general thinking in health economies with respect to assuming that a QALY is a QALY is a QALY. Consequently, some of the issues we raise have wider relevance. First, the authors state: ‘to use cost-utility analysis for societal decisions, all the costs have to be included in the analysis’. We would agree that economic evaluation aimed at some societal decision making should include all costs no matter on whom they fall-in this context it does not matter whether they fall on the health service budget or not. Cost-utility analysis, however, based as it is only on the output side QALYs, is inappropriate for such societal decision making. The opportunity costs of patient time (which Johannesson and O’Conor want included in societal costs) have to be considered in terms of benefits foregone, which are much wider than simply health. If patients sit in a GP’s waiting room they may do so at the expense of seeing their favourite television program. Cost-utility analysis when used in priority setting across different programmes cannot cope legitimately with that [2] since on the benefit side all that is included are QALYs. Certainly, if these non-health service costs were constant per QALY across different programmes then in the context of deciding how best to allocate additional health service resources across different competing programmes, this particular problem would disappear. This constancy, however, is most unlikely to apply in practice. Secondly, Johannesson and O’Conor argue that ‘[i]f all the costs (i.e. not just health service costs) are included in a cost-utility analysis, the difference between cost-utility analysis and cost benefit analysis is that the willingness to pay per QALY gained is constant and the same for everyone in cost-utility analysis’. This 0168~8510/97/$17.00 PIISO168-8510(97)00032-8
0
1997 Elsevier
Science
Ireland
Ltd.
All
rights
reserved
202
A Second
Opinion
1 Health
Policy
41 (1997)
201--205
however is only a part of the story of the difference. Additionally, cost-utility analysis only includes (indeed can only include) health benefits while cost-benefit analysis is not restricted in this way. There is growing evidence that the benefits of health care are not restricted to health benefits [3-51. The extent too to which cost-utility analysis incorporates externalities is normally more limited than in cost-benefit analysis. Thirdly, these authors suggest that: ‘One argument for using a constant price per QALY gained is that variations in the willingness to pay per QALY gained merely reflect difference in the marginal utility of income.’ They add: ‘This would be the case if QALYs are a measure of individual utility that can be aggregated into a measure of social utility (welfare).’ The authors themselves however note earlier in the paper that this would require a set of highly restrictive assumptions and as such present no real case in this instance for supporting the constant price per QALY decision rule. Additionally, there is here (and indeed throughout the article) in our view a problem in the authors’ use of the expression ‘price per QALY’. They appear to equate price with willingness to pay. There seems to be a confusion here between price and value. Fourthly, Johannesson and O’Conor argue that: ‘Even if QALYs do not provide a measure of utility, it could be argued that it is better to use a constant willingness to pay per QALY rather than let the willingness to pay per QALY vary according to a cost-benefit analysis’. Rightly in our view they go on to say that this depends on ‘both differences in the marginal of income and dzfferences in the marginal utility of QALYs’ (emphasis added). The authors then defend a constant willingness to pay per QALY on the grounds that ‘the willingness to pay should be adjusted for differences in the marginal utility of income’. They thus ignore their own (in our view valid) point that the marginal utility of QALYs may vary from individual to individual! Finally, they claim on the basis of the above points that ‘it is possible to make a coherent argument in favour of using a constant willingness to pay per QALY gained in economic evaluations of health care’. We would dispute that they have succeeded in this. To adopt a constant social value per QALY gained (and we would suggest that it is the appropriate issue rather than price and that, perhaps unfortunately, for reasons we spelt out above the costs have to be restricted to health service costs), there is a need for two further conditions: (1) (a) Individuals’ preferences for QALYs are assumed to be constant or (b) society imposes a view that the allocation of health service funds ought not to take account of variations in individuals’ preferences for our own health. (2) Society argues that no distinction should be drawn (irrespective of (1) above) in allocating health gains or QALYs gained to different groups, i.e. that the social value of a health gain should not depend on such factors as age, socio-economic status, existing health state, etc. There is already some evidence that the assumption in l(a) does not hold [6,7] and the condition (2) is also open to question [8-lo]. Together with a colleague we have begun research into the second issue. We have some evidence that at least
A Second
Opinion
/Health
Policy
41 (1997)
201-205
203
among health service decision makers, they would want to distinguish between health gains accruing to different social groups [l 11. In as yet unpublished work, we also have limited evidence that the cardinal weights here for health gains to different groups may be quite substantially different from 1, for example for different socio-economic groups or because of variations in existing health status. It is these two assumptions that need to be investigated and tested further, especially from the perspective of society’s preferences. Gavin Mooney and Stephen Jan
Department
of Public Health and Community Medicine University of Sydney Sydney Australia
References [l] Johannesson M, O’Conor RM, Cost-utility analysis from a societal perspective. Health Policy 1997;39:241-253. [2] Gerard K, Mooney G. QALY league tables; handle with care. Health Economics 1993;2:59964. [3] Mooney G, Lange M. Antenatal screening: what constitutes ‘benefit’? Social Science and Medicine 1993;37:873-878. [4] Ryan M. Economics and the patient’s utility function: An application to assisted reproductive techniques. Ph.D Thesis, the University of Aberdeen, Aberdeen, 1995. [5] Berwick DM, Weinstein MC. What do patients value? Willingness to pay for ultrasound in normal pregnancy. Medical Care 1985;23:881-93. [6] Sackett DL, Torrance GW. The utility of different health states as perceived by the general public. Journal of Chronic Diseases 1978;31:6977704. [7] Froberg DG, Kane RL. Methodology for measuring health-state preferences-III Population and context effects. Journal of Clinical Epidemiology 1989;42:5855592. [8] Williams A. Ethics and efficiency in the provision of health care. In: Bell JM, Mendes S, editors. Philosophy and Medical Welfare, Cambridge University Press, Cambridge, 1988. [9] Nord E, Richardson J, Street A, Kuhse H, Singer P. Maximising health benefits versus egalitarianism: An Australian survey of health issues. Social Science and Medicine 1995;41:1429- 1437. [IO] Nord E. Health status index models for use in resource allocation decision. A critical review in the light of observed preferences for social choice. International Journal of Technology Assessment in Health Care 1996;12:31~44. [II] Mooney G, Jan S, Wiseman V. Examining preferences for allocating health gains. Health Care Analysis 1995;3:231-234.
The
authors respond
While we appreciate the attention given to our paper by Mooney and Jan, we feel that they have misunderstood our intention to clarify the differences between cost-benefit analysis and cost-utility analysis. The most important objection proposed by Mooney and Jan is summed up in their introductory paragraph in which they state that we are ‘assuming that a QALY is a QALY is a QALY’. They present some empirical evidence opposed to this view and propose certain addi-
204
A Second
Opinion/Health
Policy
41 (1997)
201-205
tional ‘conditions’ which would need to be met for such an assumption to hold. Mooney and Jan also make some minor technical objections which we will also address. First of all, the two ‘further conditions’ proposed by Mooney and Jan are subsumed within our explicit assumptions regarding the use of QALYs as a measure of social welfare (p. 246). Mooney and Jan argue that they have some empirical evidence that the social value of QALYs varies between, i.e. socioeconomic groups. In principle it would of course be possible to give QALYs gained in different groups different weights, although it is not clear how to establish these weights. The difficulty of aggregating individual preferences into an overall expression of social welfare is the basis for an entire literature on welfare economics (for instance, see Boadway and Bruce [l]) beginning with Arrow’s [2] classic work. The issue on how to aggregate QALYs into a measure of social welfare is an important topic for further work in this area. Furthermore, Mooney and Jan claim that, in proposing the use of a constant price per QALY decision rule, we ignore our own point that, for the case where QALYs are considered only as a measure of health and not as a measure of utility, the marginal utility of QALYs may vary from individual to individual. In fact rather than ignore it, we explicitly acknowledge and discuss this issue in a section of our paper. In Mooney and Jan’s discussion of this section of our paper however, they revert to arguments which apply only in the case where QUALYs are considered as a measure of utility. Thus, there is a fundamental confusion over the nature of QALYs which underlies their arguments. Mooney and Jan also argue that cost-utility analysis cannot be used for societal decision-making since some of the costs of health care programmes ‘have to be considered in terms of benefits foregone which are much wider than simply health’. This argument is simply erroneous. Regardless of whether cost-utility analysis or cost-benefit analysis is carried out, costs should be estimated as the opportunity costs of the treatment (i.e. the value of the benefits foregone), in which case there is no difference between the costs of patient time and other resources used to produce better health. In a related argument, Mooney and Jan suggest that cost-utility analysis cannot incorporate non-health benefits. However, if a health care programme yields non-health benefits, these can simply be included among the costs (i.e. they will reduce the net costs). This is in principle no different from including savings in health care costs in the net costs of a health care programme. As long as these additional benefits can be quantified it is straightforward to include them in a cost-utility analysis (and the problem of quantifying some costs and benefits is the same for both cost-utility analysis and cost-benefit analysis). Lastly, Mooney and Jan quibble with our use of the expression ‘constant price per QALY’ and argue that the term ‘constant value’ should be used instead. It should be clear that whether we refer to ‘constant price’, ‘constant value’ or ‘constant willingness to pay’ is of no importance to our arguments. A constant price per QALY gained obviously implies a constant value.
A Second
Opinion
/Health
Policy
41 (1997)
201-205
205
Our article was an effort toward narrowing the gap between proponents of cost-utility analysis on the one hand and cost-benefit analysis on the other. Both types of analysis are currently practised and it seems a productive avenue of research to clarify the differences between them and to look for ways to reconcile the approaches in practical as well as theoretical terms. It is clearly stated in our article (p. 251) that our purpose was not to argue that using a constant cost per QALY gained is necessarily to be preferred to a pure cost-benefit analysis approach (where the willingness to pay per QALY gained is allowed to vary), but was instead to outline the arguments that could be used in favour of using a constant per QALY gained. In contrast to Mooney and Jan, we think it is possible to make a coherent argument in favour of using a constant willingness to pay per QALY gained, although further work is needed to conclude if this model is to be preferred to a pure cost-benefit approach. In conclusion, we would point out that this effort is not limited to the debate over QALYs, but is part of a larger area of research in welfare economics. For instance, Pratt and Zeckhauser [3] recently concluded in a formal analysis that if wealth does not differ between individuals we should use a constant price per statistical life saved to assess lifesaving programmes. In our view, their analysis provides the strongest theoretical foundation for cost-effectiveness (and cost-utility) analysis presented so far. Magnus Johannesson and Richard M. O’Conor Centre for Health Economics Stockholm School of Economics Stockholm Sweden
References [I] Broadway RW, Bruce N, Welfare Economics, Blackwell, Oxford, 1984. [2] Arrow KJ, Social Choice and Individual Values, Yale University Press, New Haven, 1951. [3] Pratt JW, Zeckhauser RJ, Willingness to pay and the distributions of risk and wealth. Journal of Political Economy 1996;104:747-63.