Measures of efficiency in healthcare: QALMs about QALYs?

Abstract

Comparative economic evaluations are concerned with the relative efficiency of alternative uses for scarce resources. Cost-benefit analysis (CBA) is grounded in economic welfare theory and attempts to identify alternatives with a net social benefit, measuring the created value in terms of individual willingness to pay (WTP). In applied health economics, cost-effectiveness evaluation (CEA) is more widely used than CBA, adopting a modified efficiency criterion, minimization of incremental costs per quality-adjusted life year (QALY) gained ("cost-utility analysis," CUA). CBA has been greeted with skepticism in the health policy field, primarily owing to resistance to a monetary measure of benefit and owing to concerns that WTP may be unduly influenced by ability to pay. The move to CUA, however, has not been without problems. The framework deviates from economic theory in important aspects and rests on a set of highly restrictive assumptions, some of which must be considered as empirically falsified. Results of CUAs do not seem to be aligned with well-documented social preferences and the needs of healthcare policy makers acting on behalf of society. By implication, there is reason to assume that a context-independent value of a QALY does not exist, with potentially fatal consequences for any attempt to interpret CUAs in a normative way. Policy makers seem well advised to retain a pragmatic attitude towards the results of CUAs, while health economists should pay more attention to the further development of promising alternative evaluation paradigms as opposed to the application of algorithms grounded in poor theory.