Willingness to pay in the context of an economic evaluation of healthcare programs: theory and practice. Academic Article uri icon

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abstract

  • Cost-benefit analysis (CBA) is defined in the methodology literature as a form of economic evaluation in which both costs and consequences are measured in monetary terms. In recent years we have witnessed renewed enthusiasm for CBA and the use of willingness to pay (WTP) as a method of measuring benefits from healthcare providers. Using the economics perspective, this paper assesses the usefulness of the WTP measure in a context of CBA analysis for economic evaluation of healthcare interventions. Starting from the welfarist approach as the foundation of the analysis, this paper evaluates the benefit and cost of using WTP as a measure of outcome compared mainly with the most commonly used measure of outcome (i.e., quality-adjusted life years) as well as a newly suggested measure of outcome (i.e., healthy-years equivalents). This paper studies this issue from both theoretical and practical aspects. The analysis starts with the premise that we want to use the discipline of economics as the mode of thinking and evaluate the methods suggested using economic criteria. A framework that includes five indicators (or criteria) to help identify the measures of outcome that are proper for use in the context of an economic evaluation are described. Following this framework, the paper argues that from a theoretic perspective the WTP approach is the best available measure, despite its limitations. This paper also describes a new instrument that can be used to measure individuals' WTP as well as a recent experience assessing the feasibility of using such an instrument in the context of evaluating a new pharmaceutical agent in a managed care setting. The conclusion of this study is that this technique holds promise as a method that can generate monetary values for program benefits for future use in CBA.

publication date

  • May 1997