WTP- and QALY-Based Approaches to Valuing Health for Policy: Common Ground and Disputed Territory
This paper discusses links between two approaches to the value of health: the willingness to pay approach of environmental economics and the quality-adjusted life year approach of health economics. The approaches are used in cost-benefit and cost-effectiveness analyses of health interventions. Despite fundamental differences in the decision contexts and conceptual foundations of the two approaches, in current practice they are likely to lead to similar policy decisions. The paper also shows how research on the quality-adjusted life year (QALY) can be used to fill in gaps in the willingness to pay literature. The paper sketches a simple model that shows how to 'QALY-fy the value of a statistical life;' i.e., how to combine QALY estimates with estimates of the value of a statistical life to estimate willingness to pay for morbidity risks.