Equity Weights Research Articles

Alternative Approaches to Quality-Adjusted Life-Year Estimation Within Standard Cost-Effectiveness Models: Literature Review, Feasibility Assessment, and Impact Evaluation.

The quality-adjusted life-year (QALY) has been long debated, but alternative estimation approaches have not been comprehensively evaluated. Our objective was to identify alternatives, characterize them by implementation feasibility, and evaluate the impact of implementing feasible options in cost-effectiveness models developed for the Institute for Clinical and Economic Review reports. We conducted a literature review combining keywords relating to QALYs, methodology alternatives, and cost-effectiveness in PubMed, EconLit, Web of Science, and MEDLINE. Articles that discussed alternatives to the conventional QALY were included. Alternatives were characterized by type, data availability, calculation burden, and overall implementation feasibility. The subset of feasible alternatives, that is, sufficient data and methodology compatible with incorporation into common modeling approaches, were evaluated according to impact on incremental QALYs, incremental net monetary benefit (iNMB), intervention rankings, and proportion of interventions with a positive iNMB. We identified 28 articles discussing 9 alternatives. Feasible alternatives were using patient preference (PP) data; equity weighting according to baseline utility, fair innings, or proportional QALY shortfall; and the equal value of life-years-gained approach. All alternatives affected the incremental QALY and iNMB outcomes, rankings, and proportion of interventions with a positive iNMB. The PP alternative had the largest and most consistent impact. The PP impact on the proportion of interventions with a positive iNMB, was in the negative direction. Our work is the first comprehensive evaluation of proposed alternatives to the conventional QALY. We found robust literature but few options that were feasible to be implemented in current healthcare decision-making processes.

Squaring the cube: Towards an operational model of optimal universal health coverage

Universal Health Coverage (UHC) has become a key goal of health policy in many developing countries. However, implementing UHC poses tough policy choices about: what treatments to provide (the depth of coverage); to what proportion of the population (the breadth of coverage); at what price to patients (the height of coverage). This paper uses a theoretical mathematical programming model to derive analytically the optimal balance between the range of services provided and the proportion of the population covered under UHC, using the general principles of cost-effectiveness analysis. In contrast to most CEA, the model allows for variations in both the costs of provision and the social benefits of treatments, depending on the deprivation level of the population. We illustrate empirically the optimal trade-off between the size of the benefits package and the proportion of the population securing access to each treatment for a hypothetical East African country, based on WHO data on the costs and benefits of treatments at different coverage levels. We begin with a scenario allowing coverage levels to vary, then apply differential equity weights to the benefits of coverage, and finally illustrate a scenario where interventions are either provided at 95% coverage or not at all (as is usually done in health benefits package design) for comparison. The results present the optimal trade-off between the social benefits of pursuing full population coverage, at the expense of expanding the benefits package for ‘easier to reach’ populations.

PNS17 ASSESSING TECHNOLOGIES THAT ARE EFFECTIVE BUT NOT COST-EFFECTIVE AT ZERO PRICE: AN ALTERNATIVE FRAMEWORK

The traditional framework for the financing decision of health technologies relies on the comparison between an incremental cost-effectiveness ratio and a threshold that represents the willingness to pay for a unit of health. A non-expected consequence is that technologies developed for populations with high background or follow-up costs struggle to demonstrate cost-effectiveness. The National Institute for Health and Care Excellence (NICE) faced a financing decision of effective drugs that, even when a zero price was considered, were not cost-effective. This clearly contradicts a common sense approach which assumes that a drug with added therapeutic value and a realistic price should be cost-effective. This paper has two main objectives: 1) the identification, in the Portuguese context, of health technologies with clinical effectiveness but negative cost-effectiveness results even when considering a zero price; 2) to suggest changes in the decision-making process in order to overcome this problem. We believe that the Portuguese regulatory agency is implicitly taking considering a higher willingness to pay for health benefits in some populations. The consideration of equity concerns would explain the apparent inconsistency in some financing decisions. We suggest that equity concerns should be explicitly incorporated in the estimate of incremental benefits by assuming different weights for different patients. We present a simple model based on the foundations of cost-effectiveness in economic theory showing that the exclusion of future and background costs is not a valid solution to this problem and that the introduction of equity weights would be easy to implement and to interpret.

Equity Weights for Priority Setting in Healthcare: Severity, Age, or Both?

BackgroundPriority setting in healthcare can be guided by both efficiency and equity principles. The latter principle is often explicated in terms of disease severity and, for example, defined as absolute or proportional shortfall. These severity operationalizations do not explicitly consider patients' age, even though age may be inextricably related to severity and an equity-relevant characteristic. ObjectiveThis study examines the relative strength of societal preferences for severity and age for informing allocation decisions in healthcare. MethodsWe elicited preferences for severity and age in a representative sample of the public in The Netherlands (N = 1025) by applying choice tasks and person-trade-off tasks in a design in which severity levels and ages varied both separately and simultaneously between patient groups. We calculated person trade-off ratios and, in addition, applied ordinary least squares regression models to aid interpretation of the ratios when both severity and age varied. ResultsRespondents attached a higher weight (median of ratios: 2.46-3.50) to reimbursing treatment for relatively more severely ill and younger patients when preferences for both were elicited separately. When preferences were elicited simultaneously, respondents attached a higher weight (median of ratios: 1.98 and 2.42) to reimbursing treatment for relatively younger patients, irrespective of patients’ severity levels. Ratios varied depending on severity level and age and were generally higher when the difference in severity and age was larger between groups. ConclusionsOur results suggest that severity operationalizations and equity weights based on severity alone may not align with societal preferences. Adjusting decision-making frameworks to reflect age-related societal preferences should be considered.

Social preferences for distributive outcomes of climate policy

This study examines whether people exhibit social preferences for the distributive outcomes of climate policy when making actual donations towards such policies. In an online choice experiment, using a real donation mechanism, a sample of 95 members of the Danish public are provided 27 € and asked to make 16 donation choices among different climate policy options. The climate policies are described in terms of two main outcome variables: future effects on income in 2100 and present-time provision of co-benefits from climate policy. Both outcomes are described for three specific regions of the world, Western Europe, Southeast Asia and Sub-Saharan Africa. For each participant, one policy choice is drawn at random to be realized. The total amount donated by participants is used to purchase and withdraw CO2 quotas and credits in the European Emission Trading Scheme and as donations to the UN Adaptation Fund. The results indicate that distributional outcomes matter for people when they donate to climate policy and that elements of both inequity aversion and general altruism influence the choice of climate policy. The findings contribute towards an empirical foundation for the use of equity weights in determining the social cost of carbon, with the implication that the price on greenhouse gas emissions should be higher due to the concern for distributional impacts.

Redistribution and pollution taxes with non-linear Engel curves

This paper analyses optimal corrective taxation and optimal income redistribution. The Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, under general utility functions, optimal pollution taxes should be set below the Pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods. However, if Engel curves are linear, optimal pollution taxes should follow the first-best rule for the Pigouvian corrective tax even if the government wants to redistribute income and the poor spend a disproportional part of their income on polluting goods. The often-used quasi-linear, CES and Stone-Geary utility functions all have linear Engel curves. If Engel curves are linear, and if pollution taxes are not optimised, Pareto-improving green tax reforms exist that move the pollution tax closer to the Pigouvian tax. Simulations demonstrate that optimal corrective taxes should be Pigouvian if the demand for polluting goods is derived from a LES demand system, but deviate from the Pigouvian taxes if demand for polluting goods demand is derived from a PIGLOG demand system.

Priority Setting in Health Care with Disease and Treatment Risks

Abstract This paper deals with the issue of priority setting in health care under uncertainties about the severity of the illness and the effectiveness of medical treatment. We examine the effect of a disease uncertainty (a treatment uncertainty) on the allocation of health care resources in the presence of a treatment risk (a disease risk) and identify preference conditions under which the social planner allocates more resources to higher risk population. We allow for the simultaneous presence of two risks and investigate the joint effect of two-source uncertainties on health care allocation when the two risks are either small or positively quadrant dependent. The effect of inequality aversion on health care allocation is also analyzed by introducing an equity weighting function. Our work extends the previous model of health care priority to two-risk framework and provides new insights into the problem of health care decision making under uncertainty.

PRINCIPLES OF SOCIAL COST-BENEFIT ANALYSIS OF PUBLIC ROAD PROJECTS FOLLOWED IN SOUTH AFRICA

This article discusses the most pertinent principles that underlie the preferred social cost-benefit analysis methodology to evaluate public road projects in South Africa. The ‘cost’ component of the analysis is the once-off investment cost sacrificed to establish a facility, and the ‘benefit’ component is the recurring reduction of disutility emanating from the operation, maintenance, and use of a facility. To determine future road-user benefits, the article develops a social surplus criterion that is termed ‘socio-economic user surplus’. A procedure is provided of the way that social cost-benefit analysis should be supplemented by the application of equity weighting, with a view to indicating both the expected allocative efficiency and distributive efficiency of a proposed road project. Lastly, the article discusses why the economic impacts that may stem from economically justified road projects are not considered in a social cost-benefit analysis.

PHP33 - Equity Weights for Socioeconomic Position: Two Methods – Using Surveys of Stated Preferences and Using Epidemiological Data

PHP33 - Equity Weights for Socioeconomic Position: Two Methods – Using Surveys of Stated Preferences and Using Epidemiological Data

Equity Weights for Socioeconomic Position: Two Methods—Survey of Stated Preferences and Epidemiological Data

BackgroundThere is an implicit equity approach in cost-effectiveness analysis that values health gains of socioeconomic position groups equally. An alternative approach is to integrate equity by weighting quality-adjusted life-years according to the socioeconomic position group. ObjectivesTo use two approaches to derive equity weights for use in cost-effectiveness analysis in Australia, in contexts in which the use of the traditional nonweighted quality-adjusted life-years could increase health inequalities between already disadvantaged groups. MethodsEquity weights derived using epidemiological data used burden of disease and mortality data by Socio-Economic Indexes for Areas quintiles from the Australian Institute of Health and Welfare. Two ratios were calculated comparing quintile 1 (lowest) to the total Australian population, and comparing quintile 1 to quintile 5 (highest). Preference-based weights were derived using a discrete choice experiment survey (n = 710). Respondents chose between two programs, with varying gains in life expectancy going to a low- or a high-income group. A probit model incorporating nominal values of the difference in life expectancy was estimated to calculate the equity weights. ResultsThe epidemiological weights ranged from 1.2 to 1.5, with larger weights when quintile 5 was the denominator. The preference-based weights ranged from 1.3 (95% confidence interval 1.2–1.4) to 1.8 (95% confidence interval 1.6–2.0), with a tendency for increasing weights as the gains to the low-income group increased. ConclusionsBoth methods derived plausible and consistent weights. Using weights of different magnitudes in sensitivity analysis would allow the appropriate weight to be considered by decision makers and stakeholders to reflect policy objectives.

Inclusion of equity in economic analyses of public health policies: systematic review and future directions

ObjectivesTo assess current approaches to inclusion of equity in economic analysis of public health interventions and to recommend best approaches and future directions. MethodsWe conducted a systematic review of studies that have used socioeconomic position (SEP) in cost‐effectiveness analyses. Studies were identified using MedLine, EconLit and HEED and were evaluated based on their SEP specific inputs and methods of quantification of the health and financial inequalities. ResultsTwenty‐nine relevant studies were identified. The majority of studies comparing two or more interventions left interpretation of the size of the health and financial inequality differences to the reader. Newer approaches include: i) use of health inequality measures to quantify health inequalities; ii) inclusion of financial impacts, such as out‐of‐pocket expenditures; and iii) use of equity weights. The challenge with these approaches is presenting results that policy makers can easily interpret. ConclusionsUsing CEA techniques to generate new information about the health equity implications of alternative policy options has not been widely used, but should be considered to inform future decision making. Implications for public healthInclusion of equity in economic analysis would facilitate a more nuanced comparison of interventions in relation to efficiency, equity and financial impact.

Equity home bias—A global perspective from the shrunk frontier

Equity home bias research explicates the need for correct characterisation of benchmark (optimum) foreign equity investment weights required for the estimation of equity home bias. This paper improves upon the traditional mean–variance optimisation framework by utilising the Bayes–Stein shrinkage technique to obtain optimal equity weights and home bias estimates for 39 countries for the period, 2000–2009. A regression model estimated with system GMM identifies financial integration, trade openness (exposure), stock market capitalisation, idiosyncratic risk and Global Financial Crisis (GFC) as the significant determinants of equity home bias. Unlike earlier studies, the relationship between home bias and financial integration is found to be U-shaped.

Climate change and the re-evaluation of cost-benefit analysis

The evaluation of climate policy has emerged as an important application of cost-benefit analysis (CBA). But the tool, as it had been most widely used previously, was not suited for this problem. Spatially, the effects of climate change transcend national boundaries and, temporally, they transcend generational time scales. CBA, in its standard form, relies on assumptions that are not fully appropriate in this context. In this essay, I discuss the shortcomings of CBA framed by its historical development and argue that its relatively recent application to climate change has contributed to growth in the literature re-evaluating its normative foundations. In relation to discounting, recent innovations emphasise aspects such as the aggregation of a multiplicity of time preferences and the distinction between inter- and intra-generational time preferences, which lead to discounting approaches that differ from the standard approach with the Ramsey equation. In relation to spatial equity, much of the recent literature argues for the use of equity weights to account for impacts on different income groups. These are significant changes relative to the orthodoxy in the field before the emergence of climate change.

Jurisdictional Conflict between the State High Court and the Customary Court of Appeal of a State in Nigeria: How Conflicting?

The question of conflict of jurisdiction between the High Court and the Customary Court of Appeal has been an interesting subject of consideration in academic and judicial circles. Unfortunately, this ‘impasse’ has alarmingly unleashed the floodgate of otherwise avoidable preliminary objections in courts, with concomitant costs to the smooth and speedy dispensation of justice. This study was undertaken to finding a way out of the protracted problem. The study concluded by arguing that the High Court and the Customary Court of Appeal, though courts of coordinate jurisdiction, do not have concurrent jurisdiction. One major cause of the problem of purported jurisdictional conflict was the restrictive interpretation usually given to section 247 (1) of the 1979 Constitution (now section 282 (1) of the 1999 Constitution). Therefore, it was recommended that a more liberal interpretation should be given to that provision to include other principles of law necessarily incidental to questions of customary law, such as fair hearing/natural justice, the weight of evidence and equity. Additionally, it was suggested that some provisions of the extant laws be amended to deal with likely elements of ambiguity, like amendments to the High Court Law, the Customary Court of Appeal Law and the Constitution of the Federal Republic of Nigeria: the proposed draft amendments were included.

Incorporating equity in economic evaluations: a multi-attribute equity state approach

In publicly funded health care systems, decision makers must continually balance often conflicting priorities of efficiency and equity. Health economists have developed a set of highly sophisticated analytical methods for assessing efficiency, but less attention has been paid to formally incorporating equity considerations into analyses. As a result, where equity is considered is often informal, ad hoc and/or simplistic. This paper is a proposal for a mechanism for formally incorporating equity within the decision process. It begins with an overview of the current literature on equity weighting. It then considers the case of a single equity domain and illustrates how this is currently applied in practice by the UK’s National Institute for Health and Care Excellence. It then proposes a more comprehensive method for considering the multi-attribute equity state, where a population exhibits more than one trait considered worthy of differential weighting. Finally, the paper proposes a mechanism by which this could be applied in practice, and concludes with a discussion of the challenges for applying multi-attribute equity weighting.

Should Pollution Taxes Be Targeted at Income Redistribution?

This paper analyses optimal corrective taxation and optimal income redistribution. Under general utility functions, the Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, optimal pollution taxes should be set below the Pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods. However, if preferences for commodities are of the Gorman (1961) polar form, optimal pollution taxes should follow the first-best rule for the Pigouvian corrective tax even if the government wants to redistribute income and the poor spend a disproportional part of their income on polluting goods. The often-used quasi-linear, CES and Stone-Geary utility functions all belong to the Gorman polar class. If preferences are Gorman polar, and if pollution taxes are not optimized, Pareto-improving green tax reforms exist that move the pollution tax closer to the Pigouvian tax. Simulations demonstrate that optimal corrective taxes should be Pigouvian if the demand for polluting goods is derived from a LES demand system, but deviate from the Pigouvian taxes if demand for polluting goods demand is derived from a PIGLOG demand system.

Should Pollution Taxes Be Targeted at Income Redistribution?

This paper analyses optimal corrective taxation and optimal income redistribution. Under general utility functions, the Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, optimal pollution taxes should be set below the Pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods. However, if preferences for commodities are of the Gorman (1961) polar form, optimal pollution taxes should follow the first-best rule for the Pigouvian corrective tax even if the government wants to redistribute income and the poor spend a disproportional part of their income on polluting goods. The often-used quasi-linear, CES and Stone-Geary utility functions all belong to the Gorman polar class. If preferences are Gorman polar, and if pollution taxes are not optimized, Pareto-improving green tax reforms exist that move the pollution tax closer to the Pigouvian tax. Simulations demonstrate that optimal corrective taxes should be Pigouvian if the demand for polluting goods is derived from a LES demand system, but deviate from the Pigouvian taxes if demand for polluting goods demand is derived from a PIGLOG demand system.

Income-based equity weights in healthcare planning and policy

Recent research indicates that there is a gap in life expectancy between the rich and the poor. This raises the question: should we on egalitarian grounds use income-based equity weights...

PRS11 - Comparison of Equity Weights of Various Adverse Consequences of Tobacco Use: A Best-Worst Scaling for Two Types of Chinese General Public

Various adverse consequences of tobacco use have gained heated interests worldwide. We are facing various problems related to tobacco: from health risks such as lung cancer and cardiovascular diseases, to reduction of physical capacity and sexual dysfunction, and to disturbance of non-smokers. One of the aims of this paper is to analyze the preferences of different people with different backgrounds. In this paper, we focused on two types of Chinese: from Mainland vs from Taiwan. We analyzed public preferences based on best-worst scaling between people from Mainland China, where smoking rate is 32%, and people from Taiwan, where smoking rate is 19% just as low as Western European countries. We conducted a web-based survey in Sep 2015 including best-worst scaling (BWS) to elicit general publics’ equity weight for various adverse consequences of tobacco use from two types of different Chinese: from Mainland vs from Taiwan. We selected adverse consequences of tobacco use following manners used in Joachim (2012), which focused on Switzerland’s adolescents. 240 Mainland Chinese and 240 Taiwanese Chinese completed questionnaires and were eligible for analysis. Taiwanese Chinese put higher weight on ‘Inhalation of chemicals’ (ranked in 5th vs 7th (Mainland)) and ‘Disturbance of non-smoker’ (ranked in 7th vs 11th (Mainland). For both types of Chinese, ‘Lung cancer (1st)’, ‘Cardiovascular diseases (2nd)’ and ‘COPD(3rd)’ are highly ranked. On the other hand, ‘High expenditures (13th)’ and ‘Weight gain after cessation (12th)’ are lower ranked for both. People from two types of Chinese show different equity weights of various adverse consequences of tobacco use. It is assumed that these findings reflect the governments’ regulations (including health policies) and public preferences about tobacco use.

Inequality and the Social Cost of Carbon

This paper presents a novel way to disentangle inequality aversion over time from inequality aversion between regions in the computation of the Social Cost of Carbon. Our approach nests a standard efficiency based Social Cost of Carbon estimate and an equity weighted Social Cost of Carbon estimate as special cases. We also present a methodology to incorporate more fine grained regional resolutions of income and damage distributions than typically found in integrated assessment models. Finally, we present quantitative estimates of the Social Cost of Carbon that use our disentangling of different types of inequality aversion. We use two integrated assessment models (FUND and RICE) for our numerical exercise to get more robust findings. Our results suggest that inequality considerations lead to a higher (lower) SCC values in high (low) income regions relative to an efficiency based approach, but that the effect is less strong than found in previous studies that use equity weighting. Our central estimate is that the Social Cost of Carbon increases roughly by a factor of 2.5 from a US perspective when our disentangled equity weighting approach is used.