The ‘well-being valuation method’ is a recently developed technique for valuing the effect, in monetary terms, of a health problem on an individual’s well-being. The method involves calculating the compensating variation necessary to maintain the same level of well-being after suffering from a particular health problem, and is hoped to offer a solution to the problems of revealed preference and contingent valuation methods. A recent IZA paper investigated whether there was consistency in well-being measures for valuations of different health problems. The authors find (as might be expected) that different well-being measures give very different results. This post is inspired by the paper.
Monetary valuation of health problems is certainly a decision-makers dream. If done right it would also be a health economist’s dream. The QALY was developed as a substitute currency for health, as money was not deemed appropriate and willingness to pay and accept methods are notoriously biased, controversial and inconsistent. The well-being valuation approach has the potential to allow us to scrap this stand-in currency by using ‘The Leydon Approach‘ and aiming questions about health problems at a representative sample of the public. Using this method we can figure out the value that individuals assign to losses in well-being associated with particular health problems and can thus decide whether a particular intervention represents good value for money. This method can also, very easily, provide different values for people with different socio-demographics.
In calculating QALYs there is some consensus in the use of generic preference-based measures of health-related quality of life. The well-being measure that should be used in the well-being valuation approach is unclear and, as the recent IZA paper showed, different measures give different results. And besides, is this even the direction in which health economics should be heading? Wouldn’t we be better-off adapting the QALY method and possibly working harder to assign monetary values to QALYs? Using willingness to pay methods this is not something which is really possible at the moment, due to numerous methodological problems. However, this is not to say we shouldn’t still be trying to do this using different methods. There are also massive equity concerns when we start assigning monetary values to health problems, as different people value money differently; arguably not in a way that is representative of underlying preferences for health.
Personally I think that the well-being valuation approach is, in principle, a potentially great new idea for the health economics field to adopt. It seems particularly relevant to the current debate in the UK over value-based pricing. However, I have many reservations over the direct monetary valuation of health problems as they are currently carried out. I would like to see a future analysis in the literature of the implications for equity issues of using the well-being valuation approach instead of QALYs. With the piece of mind that these methods can provide equitable outcomes I feel this new method could (and possibly should) be adopted more widely.
Please provide your thoughts on this subject using the comments box below. Also, please highlight any literature relevant to this debate.