Uncertainty and the Undervaluation of Services for Severe Health States in Cost-Utility Analyses

Value in Health : the Journal of the International Society for Pharmacoeconomics and Outcomes Research
Jeff RichardsonAimee Maxwell

Abstract

To test the hypothesis that the "severity effect"-the preference for more than utility-maximizing expenditure on severe health states-may be the result of, or exacerbated by, the uncertainty associated with the chance of contracting the illness that causes the severe health state. Survey respondents were asked to imagine that they will contract one of two illnesses and asked to allocate a budget between two insurance policies, each of which provides services for the treatment of one of the illnesses. A person's final health state varied with the amount of insurance purchased for the illness that occurred and therefore with the level of treatment. The relative cost of the two policies was altered and the selected levels of insurance compared with the levels that would be provided by a health authority that sought to maximize total utility or quality-adjusted life-years from its own budget. Respondents selected more than utility-maximizing insurance for protection against severe health states. A number of psychological factors that affect measurement under uncertainty do not affect utility as currently measured. This difference may explain the present results and also explain the "severity paradox" that personal preferences as pr...Continue Reading

Citations

Jan 18, 2019·Journal of Market Access & Health Policy·Jeff Richardson, Michael Schlander

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