Measurement of QALYS and the welfare implications of survivor consumption and leisure forgone

In previous work (Health Econ. 2004; 13: 417–427; Health Econ. 2006; 15: 319–322) has suggested that survivor consumption costs should be included in cost‐utility analyses only if the corresponding utility gains are also included. Here, it is further argued that the welfare implications of survivor consumption are already known because unlike new medical treatments or interventions whose complex and uncertain outcomes and third‐party purchasing make the welfare implications unclear, survivor consumption must have passed a private market welfare test. That is, the gains must have exceeded the costs in order for the survivor consumption to be purchased; therefore, survivor consumption is welfare increasing. The same would apply for survivor leisure forgone. Implications for cost‐benefit analysis are clear, but are less so for cost‐utility analysis. Moreover, as it is currently practiced, cost‐utility analysis does not evaluate welfare because quality‐adjusted life years (QALYs) do not meet all the criteria for representing utility. Therefore, rather than using QALYs to analyze welfare, cost‐QALY analysis should be differentiated from cost‐utility analysis. The former should continue to employ existing QALYs as a measure of health‐focused effectiveness, but the latter should develop a new broader measure that meets the criteria for representing utility, and either this new measure or cost‐benefit analysis should be used to evaluate welfare. Copyright © 2009 John Wiley & Sons, Ltd.