Assigning values to intermediate health states for cost-utility analysis: theory and practice.

Cost-utility analysis (CUA) was developed to guide the allocation of health care resources under a budget constraint. As the generally stated goal of CUA is to maximize aggregate health benefits, the philosophical underpinning of this method is classic utilitarianism. Utilitarianism has been criticized as a basis for social choice because of its emphasis on the net sum of benefits without regard to the distribution of benefits. For example, it has been argued that absolute priority should be given to the worst off when making social choices affecting basic needs. Application of classic utilitarianism requires use of strength-of-preference utilities, assessed under conditions of certainty, to assign quality-adjustment factors to intermediate health states. The two methods commonly used to measure strength-of-preference utility, categorical scaling and time tradeoff, produce rankings that systematically give priority to those who are better off. Alternatively, von Neumann-Morgenstern utilities, assessed under conditions of uncertainty, could be used to assign values to intermediate health states. The theoretical basis for this would be Harsanyi's proposal that social choice be made under the hypothetical assumption that one had an equal chance of being anyone in society. If this proposal is accepted, as well as the expected-utility axioms applied to both individual choice and social choice, the preferred societal arrangement is that with the highest expected von Neumann-Morgenstern utility. In the presence of risk aversion, this will give some priority to the worst-off relative to classic utilitarianism. Another approach is to raise the values obtained by time-tradeoff assessments to a power a between 0 and 1. This would explicitly give priority to the worst off, with the degree of priority increasing as a decreases. Results could be presented over a range of a. The results of CUA would then provide useful information to those holding a range of philosophical points of view.