Is there a kink in consumers' threshold value for cost‐effectiveness in health care?

Bernie J. O'Brien, Kirsten Gertsen, Andrew R. Willan and A. Faulkner

Health Economics, 2002, vol. 11, issue 2, 175-180

Abstract: Background: A reproducible observation is that consumers' willingness‐to‐accept (WTA) monetary compensation to forgo a program is greater than their stated willingness‐to‐pay (WTP) for the same benefit. Several explanations exist, including the psychological principle that the utility of losses weighs heavier than gains. We sought to quantify the WTP–WTA disparity from published literature and explore implications for cost‐effectiveness analysis accept–reject thresholds in the south‐west quadrant of the cost‐effectiveness plane (less effect, less cost). Methods: We reviewed published studies (health and non‐health) to estimate the ratio of WTA to WTP for the same program benefit for each study and to determine if WTA is consistently greater than WTP in the literature. Results: WTA/WTP ratios were greater than unity for every study we reviewed. The ratios ranged from 3.2 to 89.4 for environmental studies (n=7), 1.9 to 6.4 for health care studies (n=2), 1.1 to 3.6 for safety studies (n=4) and 1.3 to 2.6 for experimental studies (n=7). Conclusions: Given that WTA is greater than WTP based on individual preferences, should not societal preferences used to determine cost‐effectiveness thresholds reflect this disparity? Current convention in cost‐effectiveness analysis is that any given accept–rejection criterion (e.g. $50 k/QALY gained) is symmetric – a straight line through the origin of the cost‐effectiveness plane. The WTA–WTP evidence suggests a downward ‘kink’ through the origin for the south‐west quadrant, such that the ‘selling price’ of a QALY is greater than the ‘buying price’. The possibility of ‘kinky cost‐effectiveness’ decision rules and the size of the kink merits further exploration. Copyright © 2002 John Wiley & Sons, Ltd.

Date: 2002
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