When Do the "Dollars" Make Sense?

There is growing interest in the application of cost-benefit analysis (CBA) as a technique for the economic evaluation of health care programs. A distinguishing feature of CBA is that costs and benefits are expressed in the same units of value--typically money. A popular method for estimating money values for health care programs is the use of willingness-to-pay (or accept) survey techniques known as contingent valuation. This paper presents a conceptual framework to help in the interpretation or design of contingent valuation studies in health care. To be consistent with the theory upon which CBA is built, the authors consider what types of questions should be asked of what populations. They conclude that studies undertaking contingent valuation should distinguish between compensating variation and equivalent variation, and recognize that respondents can be gainers or losers in utility and therefore should be asked willingness-to-pay (or accept) questions as appropriate. Current critical-appraisal guidance in the health care literature for CBA is poor and unlikely to offer useful demarcation between good and bad CBA studies. More work is needed exploring whether recently issued guidelines for contingent valuation in environment damage assessment are applicable to health care studies.