On the commensurability of efficiency

In this week’s round-up, I highlighted a recent paper in the journal Cambridge Quarterly of Healthcare Ethics. There are some interesting ideas presented regarding the challenge of decision-making at the individual patient level, and in particular a supposed trade-off between achieving efficiency and satisfying health need.

The gist of the argument is that these two ‘values’ are incommensurable in the sense that the comparative value of two choices is ambiguous where the achievement of efficiency and need satisfaction needs to be traded. In the journal round-up, I highlighted 2 criticisms. First, I suggested that efficiency and health need satisfaction are commensurable. Second, I suggested that the paper did not adequately tackle the special nature of microlevel decision-making. The author – Anders Herlitz – was gracious enough to respond to my comments with several tweets.

Here, I’d like to put forth my reasoning on the subject (albeit with an ignorance of the background literature on incommensurability and other matters of ethics).

Consider a machine gun

A machine gun is far more efficient than a pistol, right? Well, maybe. A machine gun can shoot more bullets than a pistol over a sustained period. Likewise, a doctor who can treat 50 patients per day is more efficient than a doctor who can treat 20 patients per day.

However, the premise of this entire discussion, as established by Herlitz, is values. Herlitz introduces efficiency as a value and not as some dispassionate indicator of return on input. When we are considering values – as we necessarily are when we are discussing decision-making and more generally ‘what matters’ – we cannot take the ‘more bullets’ approach to assessing efficiency.

That’s because ‘more bullets’ is not what we mean when we talk about the value of efficiency. The production function is fundamental to our understanding of efficiency as a value. Once values are introduced, it is plain to see that in the context of war (where value is attached to a greater number of deaths) a machine gun may very well be considered more efficient. However, bearing a machine gun is far less efficient than bearing a pistol in a civilian context because we value a situation that results in fewer deaths.

In this analogy, bullets are health care and deaths are (somewhat confusingly, I admit) health improvement. Treating more people is not better because we want to provide more health care, but because we want to improve people’s health (along with some other basket of values).

Efficiency only has value with respect to the outcome in whose terms it is defined, and is therefore always commensurable with that outcome. That is, the production function is an inherent and necessary component of an efficiency to which we attach value.

I believe that Herlitz’s idea of incommensurability could be a useful one. Different outcomes may well be incommensurable in the way described in the paper. But efficiency has no place in this discussion. The incommensurability Herlitz describes in his paper seems to be a simple conflict between utilitarianism and prioritarianism, though I don’t have the wherewithal to pursue that argument so I’ll leave it there!

Microlevel efficiency trade-offs

Having said all that, I do think there could be a special decision-making challenge regarding efficiency at the microlevel. And that might partly explain Herlitz’s suggestion that efficiency is incommensurable with other outcomes.

There could be an incommensurability between values that can be measured in their achievement at the individual level (e.g. health improvement) and values that aren’t measured with individual-level outcomes (e.g. prioritisation of more severe patients). Those two outcomes are incommensurable in the way Herlitz described, but the simple fact that we tend to think about the former as an efficiency argument and the latter as an equity argument is irrelevant. We could think about both in efficiency terms (for example, treating n patients of severity x is more efficient than treating n-1 patients of severity x, or n patients of severity x-1), we just don’t. The difficulty is that this equity argument is meaningless at the individual level because it relies on information about outcomes outside the microlevel. The real challenge at the microlevel, therefore, is to acknowledge scope for efficiency in all outcomes of value. The incommensurability that matters is between microlevel and higher-level assessments of value.

As an aside, I was surprised that the Rule of Rescue did not get a mention in the paper. This is a perfect example of a situation in which arguments that tend to be made on efficiency grounds are thrown out and another value (the duty to save an immediately endangered life) takes over. One doesn’t need to think very hard about how Rule of Rescue decision-making could be framed as efficient.

In short, efficiency is never incommensurable because it is never an end in itself. If you’re concerned with being more efficient for the sake of being more efficient then you are probably not making very efficient decisions.

Credit

Chris Sampson’s journal round-up for 13th March 2017

Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot. If you’d like to write one of our weekly journal round-ups, get in touch.

The effects of exercise and relaxation on health and wellbeing. Health Economics [PubMedPublished 9th Month 2017

Encouraging self-management of health sounds like a good idea, but the evidence is pretty weak. As economists, we know that something must be displaced in order to do it. This study considers the opportunity cost of time and how it might affect self-management activity and any associated benefits. Employment and education are likely to increase income and thus facilitate more expenditure on exercise. But the time cost of exercise is also likely to increase, meaning that the impact on demand is ambiguous. The study uses data from a trial of self-management support that included people with diabetes, COPD or IBS. EQ-5D, self-assessed health and the amount of time spent ‘being happy’ were all collected. Information was available for 12 different self-management activities, including ‘do exercises’ and ‘rest and relax’, and the extent to which individuals did these. Outcomes for 3,472 people at 12-month follow-up are estimated, controlling for outcomes at baseline and 6 months. The study assumes that employment and education affect health via their influence on exercise and relaxation. That seems a bit questionable and the other 10 self-management indicators could have been looked at to test this. People in full-time employment were 11 percentage points less likely to use relaxation to manage their condition, suggesting that the substitution effect on time dominates as the opportunity cost of self-management increases. Having a degree or professional qualification increased the probability of using exercise by 5 percentage points, suggesting that the income effect dominates. Those who are more likely to use either exercise or relaxation are also more likely to do the other. An interesting suggestion is that time preference might explain things here. Those with more education may prefer to exercise (as an investment) than to get the instant gratification of rest and relaxation. It’s important that policy recommendations take into consideration the fact that different groups will respond differently to incentives for self-management, at least partly due to their differing time constraints. The thing I find most interesting is the analysis of the different outcomes (something I’ve worked on). Exercise is found to improve self-assessed health, while relaxation increases happiness. Neither exercise or relaxation had a (statistically significant) effect on EQ-5D. Depending on your perspective, this either suggests that the EQ-5D is failing to identify important changes in broad health-related domains or it means that self-management does not achieve the goals (QALYs to the max) of the health service.

New findings from the time trade-off for income approach to elicit willingness to pay for a quality adjusted life year. The European Journal of Health Economics [PubMedPublished 8th March 2017

The question ‘what is a QALY worth’ could invoke any number of reactions in a health economist, from chin scratching to eye rolling. The perspective that we’re probably most familiar with in the UK is that the value of a QALY is the value of health foregone in order to achieve it (i.e. opportunity cost within the health care perspective). An alternative perspective is that the value of a QALY is the consumption value of health; how much consumption would individuals be willing to give up in order to obtain an additional QALY? This second perspective facilitates a broader societal perspective. It can tell us whether or not the budget is set at an appropriate level, while the health care perspective can only take the budget as given. This study relates mainly to decisions made with the ‘consumption value’ perspective. One approach that has been proposed is to assess willingness to pay for a QALY using a time trade-off exercise that incorporates trade-offs between length and quality of life and income. This study builds on the original work by using a multiplicative utility function to estimate willingness to pay and also bringing in prospect theory to allow for reference dependence and loss aversion. 550 participants were asked to choose between living 10 years in their current health state with their current salary or to live a reduced number of years in their current health state with a luxury income (pre-specified by the participant). Respondents were also asked to make a similar choice, but framed as a loss of income, between living 10 years at a subsistence income or fewer years with their current income. A quality of life trade-off exercise was also conducted, in which people traded reduced health and a lower income. The findings support the predictions of prospect theory. Loss aversion is found to be stronger for duration than for quality of life. Individuals were more willing to sacrifice life years to move from subsistence income to current income than to move from current income to luxury income. The results imply that quality of life and income are closer substitutes than longevity and income. That makes sense, given the all-or-nothing nature of being alive. Crucially, the findings highlight the need to better understand the shape of the underlying lifetime utility function. In all tasks, more than half of respondents were either non-traders or over-traded, indicating a negative willingness to pay. That should give pause for thought when it comes to any aggregation of the results. Willingness to pay studies often throw up more questions than answers. This one does so more than most, particularly about sources of bias in people’s responses. The authors identify plenty of opportunities for future research.

Beyond QALYs: multi-criteria based estimation of maximum willingness to pay for health technologies. The European Journal of Health Economics [PubMed] Published 3rd March 2017

Life is messy. Evaluating things in terms of a single outcome, whether that be QALYs, £££s or whatever, is necessarily simplifying and restrictive. That’s not necessarily a bad thing, but we’d do well to bear it in mind. In this paper, Erik Nord sets out a kind of cost value analysis that does away with QALYs (gasp!). The author starts by outlining some familiar criticisms of the QALY approach, such as its failure to consider the inherent value of life and people’s differing reference points. Generally, I see these as features rather than bugs, and it isn’t QALYs themselves in the crosshairs here so much as cost-per-QALY analysis. The proposed method flips current practice by putting societal preferences about fair and efficient resource allocation before attaching values to the outcomes. As such, it acknowledges the fact that society’s preferences for gains in quality of life differ from those for gains in length of life. For example, society may prefer treating the more severely ill (independent of age) but also exhibit a ‘fair innings’ preference that is related to age. Thus, quality and quantity of life are disaggregated and the QALY is no more. A set of tables is presented that can be read to assess ‘value’ in alternative scenarios, given the assumptions set out in the paper. There is merit in the approach and a lot that I like about the possibilities of its use. But for me, the whole thing was made less attractive by the way it is presented in the paper. The author touts willingness to pay – for quality of life gains and for longevity gains – as the basis for value. Anything that makes resource allocation more dependent on willingness to pay values for things without a price (health, life) is a big no-no for me. But the method doesn’t depend on that. Furthermore, as is so often the case, most of the criticisms within relate to ways of using QALYs, rather than the fundamental basis for their estimation. This only weakens the argument for an alternative. But I can think of plenty of problems with QALYs, some of which might be addressed by this alternative approach. It’s unfortunate that the paper doesn’t outline how these more fundamental problems might be addressed. There may come a day when we do away with QALYs, and we may end up doing something similar to what’s outlined here, but we need to think harder about how this alternative is really better.

Credits