Risk aversion and uncertainty in cost-effectiveness analysis: the expected-utility, moment-generating function approach

Health Economics
Elamin H Elbasha

Abstract

The availability of patient-level data from clinical trials has spurred a lot of interest in developing methods for quantifying and presenting uncertainty in cost-effectiveness analysis (CEA). Although the majority has focused on developing methods for using sample data to estimate a confidence interval for an incremental cost-effectiveness ratio (ICER), a small strand of the literature has emphasized the importance of incorporating risk preferences and the trade-off between the mean and the variance of returns to investment in health and medicine (mean-variance analysis). This paper shows how the exponential utility-moment-generating function approach is a natural extension to this branch of the literature for modelling choices from healthcare interventions with uncertain costs and effects. The paper assumes an exponential utility function, which implies constant absolute risk aversion, and is based on the fact that the expected value of this function results in a convenient expression that depends only on the moment-generating function of the random variables. The mean-variance approach is shown to be a special case of this more general framework. The paper characterizes the solution to the resource allocation problem using s...Continue Reading

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Citations

Oct 23, 2009·International Journal of Technology Assessment in Health Care·Miguel Angel Negrín HernándezElías Moreno Bas
Jul 19, 2011·PLoS Medicine·John P A Ioannidis, Alan M Garber
Dec 19, 2008·Croatian Medical Journal·Igor RudanUNKNOWN Child Health and Nutrition Research Initiative
Jul 5, 2011·Health Policy·Afschin Gandjour, Nadja Chernyak
Feb 1, 2006·Expert Review of Pharmacoeconomics & Outcomes Research·John Fp Bridges
May 8, 2020·Clinical Infectious Diseases : an Official Publication of the Infectious Diseases Society of America·Westyn Branch-EllimanRichard Nelson

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