Willingness to pay for a QALY - Theoretical and methodological issues

Gyrd-Hansen, Dorte (2005) Willingness to pay for a QALY - Theoretical and methodological issues. PharmacoEconomics, 23 5: 423-432. doi:10.2165/00019053-200523050-00002

Author Gyrd-Hansen, Dorte
Title Willingness to pay for a QALY - Theoretical and methodological issues
Journal name PharmacoEconomics   Check publisher's open access policy
ISSN 1170-7690
Publication date 2005
Sub-type Critical review of research, literature review, critical commentary
DOI 10.2165/00019053-200523050-00002
Volume 23
Issue 5
Start page 423
End page 432
Total pages 10
Place of publication Auckland, New Zealand
Publisher Adis International
Language eng
Formatted abstract
What is a QALY worth in monetary units? This paper presents the main arguments in the literature regarding the obstacles involved in establishing one unique willingness to pay (WTP) estimate for the value of a QALY.

To directly translate QALYs into monetary units, and in this manner translate existing and forthcoming cost-effectiveness analyses (CEA) to cost-benefit analyses (CBA), it is necessary that one unique WTP per QALY can be established irrespective of context-specific characteristics such as severity of illness, magnitude of health gain, patient characteristics, etc. Because CEA and CBA are two methods of economic evaluation that are based on two very different normative perceptions of the role of health versus other goods in society, the task of performing a linear translation from QALYs to WTP is theoretically unattainable.

CBA is based on the welfarist perception that the welfare associated with health is measured by way of individual preferences for health outcomes relative to other goods in society. In contrast, CEA is based on the extra-welfarist notion, which focuses on maximising health and not welfare, and suppresses any variation across income/social groups in utility derived from improvements in health. Another obstacle to one unique WTP per QALY value is that marginal utility of income is non-constant, and a function of income level and possibly health status. When marginal utility of income varies across individuals as well as contexts, measuring the value of health in monetary units may result in valuations of health increments that are very different from valuations retrieved had another unit of measure been applied.

In conclusion, from a theoretical point of view, establishing one unique WTP cannot be attained. Applying one sole WTP per QALY value will entail overriding individual preferences such as diminishing marginal utility of health and potential differences in the value of incremental health across population groups. However, one problem that can, and should, be overcome when seeking to establish a monetary value for a QALY is the problem of variance in the marginal utility of income. The importance of applying the appropriate perspective when formulating WTP questions to ensure that the marginal utility of income of the respondents equals that of the financiers of the costs invested to produce the health gains should not be overlooked.
Keyword Cost effectiveness analysis
Health care programs
Trade off approach
Benefit analysis
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Journal Article
Sub-type: Critical review of research, literature review, critical commentary
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