Longevity bias in cost‐effectiveness analysis

Liqun Liu, Andrew J. Rettenmaier and Thomas R. Saving

Health Economics, 2008, vol. 17, issue 4, 523-534

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.

Date: 2008
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https://doi.org/10.1002/hec.1309

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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:17:y:2008:i:4:p:523-534

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