Addressing risk preferences in cost-effectiveness analyses

Cost-effectiveness analysis is a form of economic evaluation that compares that compares the costs and effectiveness of health interventions, where effectiveness is measured in a single scale. Despite the growth in the popularity of cost-effectiveness analysis, very few cost-effectiveness analyses adequately measure and account for uncertainty. In the health economics literature, two schools of thought are emerging. The first takes a statistical approach to uncertainty by focusing on the likelihood that a decision making error will be made. The second approach applies and develops economic theories of risk preference that consider the welfare implications for a patient when they are presented with interventions that have uncertain health outcomes. Cost-effectiveness analyses need to account for risk preferences if they claim to be increasing patient welfare.