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Longevity bias in cost‐effectiveness analysis

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  • Liqun Liu
  • Andrew J. Rettenmaier
  • Thomas R. Saving

Abstract

We use a simple lifetime utility maximization model to study the problem of medical resource allocation. This model leads to a welfare specification with a QALY (quality‐adjusted life‐year) component that captures an individual's preferences over both life expectancy and health status. The goal of medical cost‐effectiveness analysis (CEA) is characterized as maximizing the QALY measure for a given total medical expenditure. We show that the CEA with such a goal has a longevity bias: the CEA‐based division of a given total medical expenditure between extending life and improving health gives the former a larger share than is called for by welfare maximization. Copyright © 2007 John Wiley & Sons, Ltd.

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  • Liqun Liu & Andrew J. Rettenmaier & Thomas R. Saving, 2008. "Longevity bias in cost‐effectiveness analysis," Health Economics, John Wiley & Sons, Ltd., vol. 17(4), pages 523-534, April.
    • Handle: RePEc:wly:hlthec:v:17:y:2008:i:4:p:523-534
    DOI: 10.1002/hec.1309
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    References listed on IDEAS

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    1. John A. Nyman, 2011. "Measurement of QALYS and the welfare implications of survivor consumption and leisure forgone," Health Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 56-67, January.

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