Health care policy evaluation: empirical analysis of the restrictions implied by Quality Adjusted Life Years, CHERE Working Paper 2006/10

This paper investigates the nature of the utility function for health care, defined over the probability of survival, survival duration, health state and cost of treatment. A discrete choice experiment, involving treatment choice for a hypothetical health condition is used to test restrictions on preferences in the QALY model. We find that preferences do not conform to expected utility, and there are significant interactions between health state and survival duration. Individual characteristics are significant, implying substantial differences in valuations of health states across the population. The results suggest the QALY approach distorts valuations of health outcomes.