The Value of Health - Empirical Issues when Estimating the Monetary Value of a QALY Based on Well-Being

SOEPpapers 1101, 47 S.

Sebastian Himmler, Jannis Stöckel, Job van Exel, Werner Brouwer


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Cost-utility analysis compares the monetary cost of health interventions to the associated health consequences expressed using quality-adjusted life years (QALYs). At whichthreshold the ratio of both is still acceptable is a highly contested issue. Obtaining societal valuations of the monetary value of a QALY can help in setting such threshold values but it remains methodologically challenging. A recent study applied the well-being valuation approach to calculate such a monetary value using a compensating income variation approach. We explore the feasibility of this approach in a different context, using large-scale panel data from Germany. We investigate several important empirical and conceptual challenges such as the appropriate functional specification of income and the health state dependence of consumption utility. The estimated monetary values range from e20,000-60,000 with certain specifications leading to considerable deviations, underlining persistent practical challenges when applying the well-being valuation methodology to QALYs. Recommendations for future applications are formulated.

JEL-Classification: D61;I18;I31;C33;C36
Keywords: Quality-adjusted life years, health valuation, well-being valuation, panel data,instrumental variable regression, piecewise regression