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«Edited by ANNE MASON Research Fellow, Centre for Health Economics University of York and ADRIAN TOWSE Director, Office of Health Economics Radcliffe ...»

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(Of course this doesn’t have to be the case – discrete choice experiments (DCEs) in which people traded health against waiting or the quality of hospital ‘hotel services’ could in theory be undertaken.) The response of many (but not all) extra-welfarists is often to argue (or simply assume) either that health gain is the only objective of the healthcare system, or that other outcomes (often characterised as ‘process’ outcomes) are in practice de minimus and so can be ignored in any analysis. Others point


(correctly) to some of the practical problems with the use of DCE and contingent valuation techniques – e.g. Dolan and Tsuchiya, Chapter 12 prefer to see people making choices between social outcomes rather than ● individual outcomes, and want distributional weights to be applied to QALYs. But where do they come from? Alan’s research aimed to generate them from individual preferences, but over different distributional weights, i.e. according to the public policy question. So we need to distinguish revealed/stated preferences for ‘private’ goods and for publicly provided goods where extra-welfarists can ask public choice questions have an interest in ‘deliberative processes’, which I take to be forming ● preferences through dialogue. It is a political process. On this view we cannot see the political process as one where people simply express preferences through a ballot box. Voting is a preference-revelation exercise only, political debate is a preference-forming exercise.



Theoretical demands of the decision-making approach are in principle strong:

● CEA can be compatible with the Paretian approach, i.e. we could be doing welfare economics. But strict criteria have to be met (Garber and Phelps, 1997) ● the decision-maker approach needs good valuations of health. Expected utility theory also requires strong conditions to be met – for a discussion see McGuire (2001).

Tony’s extra-welfarism is not a route to theoretical laxity. In practice, however, QALYs come from different routes which produce different values (see Chapter 10). Parkin and Devlin (2006) comment on the inconsistency between disapproval of the use of VAS (Visual Analogue Scale) and tolerance in comparing studies that use different approaches to QALY determination.

Pragmatism is required – which Tony would, I think, support. Welfarists are in danger of being parodied here. They can be eclectic too.

–  –  –

In other words, seeking individual preferences over bundles of socially provided goods is welfarist.




In principle, welfarist approaches can identify gainers and losers and then (as above) seek individual preferences over different distributions of these gains and losses, i.e. between groups of patients, in the same way as Tony supposes an extra-welfarist would. Of course, there are two concerns for an


● any use of willingness to pay to identify gains and losses introduces income constraints into valuations ● there is no use of deliberative processes, i.e. no preference formation only preference elicitation.

More fundamentally, a social welfare function has to be imposed. Extrawelfarists are very comfortable with this and have put much effort into tools to inform and develop society’s ability to understand social preferences.



Well, as Tony says, ‘what is the question, THAT is the answer’. There are perhaps three potential areas where a welfarist approach may answer the


● firstly, to support the ‘New Labour’ efforts to introduce a service orientation (in terms of consumer responsiveness) to public services.

Here the question involves understanding public preferences over non-health aspects of NHS service, and measuring the value of healthcare output using monetary valuations of non-health outcomes in combination with a monetary value of health outcomes (which can come from an extra welfarist cost per QALY threshold) ● secondly, with the use of DCE techniques to derive QALYs. Here we are using techniques more normally associated with welfare economics to derive the extra-welfarist measure of health valuation ● thirdly, to address the question of how much should the NHS budget be? (Tony explicitly confines his remarks to resource allocation within health care.) Now we need to understand how people trade off health care versus (say) education expenditure or lower taxes. We may be able to use the ‘super-QALY’ (see Chapter 13) to compare the outputs of public services, but some sense of private welfare from the consumption of marketed goods and services is needed to look at the trade-off with taxation.


CONCLUSION There is a sense in which extra-welfarism is portrayed as a purer approach (in the sense both of more representative of what matters to humans, and in the sense of being fairer as it abstracts from measures constrained by income) but also a pragmatic and eclectic approach, and therefore better designed to give the decision maker the best possible chance of understanding the impact of different policy choices. The reality seems to be a little more complicated.

Health care, and some other services, are different. A narrow application of welfarism cannot help with distributional questions. An extra-welfarist approach has clear advantages as a framework for resource allocation in these services. Extra-welfarists also have high methodological standards (although perhaps greater willingness to ignore them – which may or may not be a good thing); many have ambiguous attitudes to preference elicitation; and – in their understandable fear of introducing income constraints through the ‘back door’ – an aversion to willingness-to-pay techniques that risks inhibiting their ability to support decision makers with pragmatic analysis.

In healthcare resource allocation, extra-welfarism should rule, but welfarist techniques can and should be used to assist in understanding preferences and valuations within an extra-welfarist framework. As Tony implies, the appropriate combination of analytical tools to use depends on ‘what is the question’.

REFERENCES Arrow K (1963) Social Choice and Individual Values (2e). New York: John Wiley and Sons.

Arrow K, Solow R, Portney PR et al. (1993) Report of the NOAA Panel on Contingent Valuation. Federal Register 58: 4601–14.

Garber A and Phelps C (1997) Economic foundations of cost-effectiveness analysis.

Journal of Health Economics 16: 1–31.

McGuire A (2001) Theoretical concepts in the economic evaluation of health care. In:

Drummond M and McGuire A (eds) Economic Evaluation in Health Care. Oxford:

Oxford University Press, pp. 1–21.

Muellbauer J (1987) Professor Sen on the Standard of Living. In: Hawthorn G (ed.) The Standard of Living. Cambridge: Cambridge University Press, pp. 39–58.

Parkin D and Devlin N (2006) Is there a case for using visual analogue scale valuations in cost utility analysis? Health Economics 15: 653–64.

Sen A (1987a) The standard of living: Lecture I, Concepts and critiques. In:

Hawthorn G (ed.) The Standard of Living. Cambridge: Cambridge University Press, pp. 1–19.

Sen A (1987b) The standard of living: Lecture II, Lives and capabilities. In: Hawthorn G (ed.) The Standard of Living. Cambridge: Cambridge University Press, pp. 20–38.

Sen A (2002) Health: perception versus observation. British Medical Journal 324:




I would like to thank Diane Dawson, Anne Mason, Nancy Devlin and Tony Culyer for very helpful comments.

CHAPTER 8 Being reasonable about equity and fairness: looking back and extending the Williams way... Aki Tsuchiya and Paul Dolan This paper begins with a brief introduction looking at the general background on equity and fairness in health and health care (independently of Alan Williams’ work), and then moves on to an overview of Alan’s work in the area. Then the main part of the paper will cover three topics, all centring on the fair innings argument. First, the fair innings argument in general will be explained, using static social class weights and dynamic age weights as an example. Second, the formal process of deriving each of these weights using a health-related social welfare function is presented. Third, its application to the inequality in health between the sexes, and the possibility of going beyond health will be examined. Building on the work left by Alan, the paper will conclude with what we think are the next topics of research in this area.


Equity and fairness in standard textbooks Let us begin by carrying out a brief and informal review of how the topic of equity and fairness in health and health care has been treated in standard textbooks or introductory texts of health economics (or, at least, in the textbooks that we have used in our own teaching). The reason for starting with textbooks is because it seems to be a quick and reasonable way to identify the core issues and questions in the discipline: health economists may not agree on how to answer these but there may be some broad agreement on what are the issues that need addressing.

The Economics of Health Care: an introductory text, by Alistair McGuire, John Henderson and Gavin Mooney was published in 1988. It consists of 12 chapters, one of which is about ‘Distribution’. The importance of consideration for


equity in health care is already introduced in an earlier chapter on ‘Health care as an economic commodity’, and this chapter discusses the reasons why equity is important. Equity is defined as ‘involving some conscious depar tures(s) from the pursuit of maximising welfare (subject to some budget constraint) in the interest of a more equal distribution of some health-related characteristic (e.g. health care utilisation)’ (McGuire et al, 1988, p.55; brackets in original).* Two concepts of equity are introduced: equity as equal access for equal need (which is presented as the key policy concern), and equity as equal mortality and morbidity across socio-economically defined population groups (which is what measurement is usually concerned about). The main part of the chapter is devoted to reviewing various reasons why equity matters, including altruism, sympathy, the Kantian moral imperative, Sen’s commitment, and Rawlsian maximin, and how they apply to health care in the real world. While there is explicit acknowledgement that equity may conflict with efficiency, the focus of the chapter is on the relationships between the different theories of equity.

The second edition of Economics, Medicine and Health Care by Gavin Mooney was published in 1992 (first edition 1986). The book has two chapters out of ten where the central theme is on equity and fairness in health care. (In addition, the issue of fair shares is discussed in another chapter on financing.) The first of the two chapters questions the relevance of medical ethics in health care. Interestingly, the so-called conflict between medical ethics and economics is reformulated as a conflict between norms at the individual decision level and norms at the societal decision level. The following chapter explicitly addresses the issue of equity and fairness in health care (at the societal, or economic, level). The question of ‘what is equity’, or how to operationalise equity in health care, is addressed and seven rival definitions are compared ranging from equity as the equal expenditure per capita, equity as equal access for equal need, to equity as equality of health across individuals; and how they conflict with each other. The objective is not to promote a particular definition, but to highlight the confusion that arises from uncritical use of different definitions of equity. There is also explicit recognition that the pursuit of equity may conflict with efficiency goals.

Distributing Health Care: economic and ethical issues by Paul Dolan and Jan Abel Olsen was published in 2002. As the title suggests, distributional and ethical issues are central to the book, with three chapters out of nine specifically dedicated towards them. There is an extensive discussion on the ‘equity of what’, or what the distribuendum is: utility, primary goods, capabilities, or health. For the main part of the book, equity is operationalised as the equality of health, and competing approaches such as sum ranking, maximin, and egalitarianism are interpreted as providing support for different points along the utility possibility frontier; in other words, the pursuit of equity need not * This definition is problematic. It rules out cases where an unequal distribution might be more equitable.

However, the text further down the same page recognises that vertical equity involves the unequal treatment of unequals.


involve a trade-off with Pareto efficiency.* This culminates in the application of equity weights to quality-adjusted life years (QALYs) in cost-effectiveness analyses. Neither equity as equality of access nor equity as equality of utilisation is discussed in this book. Alongside the heavily consequentialist flavour of equity as equality of health, there is an extensive discussion of procedural justice, ‘which posits that the fairness of the procedures used in a decisionmaking process will influence an individual’s reaction to the decision’ (Dolan and Olsen, 2002, p. 44).

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