Values Beyond "Health" in Budget-Constrained Healthcare Systems

Most current methods to value healthcare treatments only incorporate measures such as quality-adjusted life-years, combining gains in health-related quality of life and life expectancy in specific ways. Failure of these methods to recognize other dimensions of value has led to calls for methods to include additional values that are associated with the healthcare treatments but not captured directly by quality-adjusted life-years. This article seeks to provide methodologically sound ways to incorporate additional health-related outcomes, focusing on budget-constrained healthcare systems, in which using standard welfare economics methods are often eschewed.

The analysis develops standard extra-welfarist approaches to maximizing aggregate health, subject to fixed-budget constraints, using Lagrange multiplier methods. Then, additional valuable health-related outcomes, eg, reduced caregiver burden, real option value, and market- and non-market productivity are introduced. The article also introduces a social welfare function approach to illuminate how disability, disease severity and other equity-related issues can be incorporated into complete welfare measures.

Resulting analysis, fully developed in an Appendix in Supplemental Materials found at https://doi.org/10.1016/j.jval.2024.02.005 and summarized in the main text, show that understanding how average and marginal healthcare costs increase with output and how health augments "additional values" provides ways to assess willingness to pay for them in these fixed-budget situations.

In budget-constrained healthcare systems, only from actual budget allocations can values both of health itself and "additional values" be inferred. These methods, combined with methodologically sound social welfare functions, demonstrate how to move from "health" to "welfare" in measuring the value of increased healthcare use.