Exploring a new method for deriving the monetary value of a QALY

Several studies have sought to determine the monetary value of health gains expressed as quality adjusted life years (QALYs) gained, predominantly using willingness to pay approaches. However, willingness to pay has a number of recognized problems, most notably its insensitivity to scope. This paper presents an alternative approach to estimate the monetary value of a QALY, which is based on the time trade-off method. Moreover, it presents the results of an online study conducted in the Netherlands exploring the feasibility of this novel approach. The results seem promising, but also highlight a number of methodological problems with this approach, most notably nontrading and the elicitation of negative values. Additional research is necessary to try to overcome these problems and to determine the potential of this new approach.


Introduction
In light of increasing health care expenditure and the limited resources available, decision makers face the challenge to determine the appropriate allocation of these resources over health programs. To help determine an appropriate distribution, economic evaluations provide information on costs and effects of health technologies. Within economic evaluations, health effects are typically expressed in Quality Adjusted Life Years (QALYs).
The QALY is an outcome measure of health benefit that combines length of life with quality of life. Quality of life is typically expressed on a scale from zero to one, where zero represents a health state equivalent to being dead and one represents perfect health [1]. By expressing health outcomes on a common unit of measurement, outcomes can be compared their true WTP, they actually have a zero value for the good (real zeros), or they protest against the exercise or payment for the good or outliers [18,21,29]. In a contingent valuation survey of Dalmau-Matarrodona (aimed at determining the value day case surgery as opposed to inpatient treatment) as much as 35% of the respondents stated a zero WTP [21]. One third of these were classified as protest zeros. An additional problem with WTP is the influence of ability to pay. This influence may be considered particularly problematic in the context of health care, where the emphasis is on accessibility and equity [30]. In WTP personal income acts as a budget constraint. The approach of WTP thus allows the wealthy to state higher values for the goods/treatments they prefer than the poor, which (depending on the use of the results) could bias health care decisions. This has led some to argue that WTP is only a valid method if we accept that the current distribution of income is appropriate [22], although Donaldson has argued that one can correct and adjust WTP towards any desired distribution [31].
In light of these issues with WTP, it seems useful to examine other ways than common WTP studies to obtain monetary valuations of health gains. In this paper, such an alternative approach is presented, which can be used to estimate the MVQ, which is based upon a Time Trade-Off (TTO) exercise of income with health held constant at perfect health.
We present the methods and theory underlying this experimental approach and some results from an online feasibility study in the Netherlands.

Methods
TTO is a widely used choice-based method of health state preference elicitation. Buckingham and Devlin [32] have outlined how the TTO method can be interpreted in the theoretical context of Hicksian utility theory and hence comply with welfare economic principles in a similar fashion to WTP derived through CV. We designed a TTO exercise in which respondents trade off length of life (in a certain health state) and income. People are thus asked to indicate their indifference between living longer (in health state X) with a lower income and living shorter (in health state X) but with a higher income. From these trade-offs, the implicit monetary value placed on a QALY can be derived. This is explained in more detail below.

Data and questionnaire
Data were gathered as part of a study seeking to determine whether respondents in TTO exercises consider the effects the states might have upon their income [33,34]. Data were gathered through an online self-complete questionnaire administered in the Netherlands.
Invitations were sent out to a subset of an existing panel of potential survey respondents in order to obtain a representative sample of 300 members of the Dutch general public. Only respondents between the ages of 18 and 65 were selected as questions about income were seen as being most relevant for people in this age bracket. The data collection was performed by an online market research company (Survey Sampling International; www.surveysampling.com). Following a number of background questions including age, sex, marital status and self-assessed health by means of a Visual Analogue Scale (VAS), respondents were presented with five different TTO exercises (see Tilling et al. [33] for more details). Two of these TTO exercises were relevant for this study, in which health is replaced by income so the trade-off becomes between longevity and income rather than longevity and health.
The wording of the first question looks as follows:

TTO 1: Trading years to avoid an income loss in perfect health (Equivalent Variation of a Loss)
"You can live for 10 years in perfect health with (100 -Y)% of your current annual income for each year and then die or you can live for a shorter period of time in perfect health with your current annual income for each year and then die." The indifference curves representing the trade-off are shown in Figure 1. The x axis represents length of life and the y axis represents income. Each indifference curve represents a level of utility that can be achieved by different combinations of longevity and income, where U2>U1>U0. The first option asks the respondent to consider a move from point b on indifference curve U1 (10 years in perfect health with current income) to point a on indifference curve U0 (10 years in perfect health with less than current income). The second option involves a move from point b to point c (X years in perfect health with current income), which is again on U0. The respondent must thus specify a decrease in longevity that is equivalent to a decrease in income, both of which causing a decrease in utility from U1 to U0. The second question also asks respondents the decrease in longevity that would be required to compensate for an increase in income, but the reference point differs: Referring again to Figure 1, the first option is to stay at point b on indifference curve U1 (10 years with current annual income). Note, in TTO2 the first option is on a higher indifference curve (U1) than in TTO1 (U0), because income is set at current annual income. An increase in income (to a value greater than current income) takes the individual on to a higher indifference curve U2, at point d. The respondent must then specify a decrease in longevity that returns them to their original indifference curve at point e on U1.
In other words, respondents have to consider an equivalent variation for a loss in TTO1. Equivalent variation is 'the amount of money a consumer would pay to avert a price increase' [35]. In TTO1 the consumer is faced with a fall in income of X%, which is essentially the same as an increase in prices. They are then asked how many years of life (rather than how much money) they would pay to avoid this 'price increase'. Similarly, TTO2 can be viewed as asking a form of compensating variation. Compensating variation is 'the amount of additional money a consumer requires to reach his initial level of utility after a change in prices' [35]. For a drop in prices, the amount of additional money compensation will be negative. TTO2 essentially corresponds to a compensating variation that identifies the number of years payable that would let the individual maintain the initial level of utility after a drop in prices, or increase in income. Essentially both questions can be interpreted as WTP questions. However, while standard WTP questions ask people to trade money for an improvement in length of life or health, these questions asked people to trade length of life for an improvement in income. Respondents were thus paying in years of life.
Three income change levels (Y) were used: in version 1 of the questionnaire 20% was used, in version 2 40% and in version 3 60%. Respondents were randomised to one of the three income change levels which they then received in both TTO1 and TTO2. Since the survey was administered in an online self-complete fashion there was no iterative process.
Respondents were simply asked to state how many years with higher income, was equivalent to 10 years with lower income. All respondents first received TTO1, followed by TTO2.

Analysis of responses
Our responses can only be interpreted and analysed after assuming the form of the utility function of respondents over health and income. In the current paper, given its explorative nature, we assume a simple additive function W(.) over health (H) and income (Y): That is, individuals derive utility (U) from their health state H and have a linear utility function over income. This specification was used earlier by Eeckhoudt et al. [36]. The advantage of this function is that it becomes straightforward to elicit a monetary value of the utility of perfect health. Moreover, an additive way of thinking when answering this task is cognitively less demanding and appears more plausible than a multiplicative way of thinking.
To see how the results from these questions can be used to derive an MVQ imagine that a respondent facing TTO1 states that 9 years with normal annual income of €100,000 is equivalent to 10 years with 80% of this income, so €80,000. Using prospective lifetime income values and assuming a zero discount rate, this point of indifference gives us the following information (with PH abbreviating Perfect Health): 10U (PH) -9U (PH) = €900,000 -€800,000 In reality, it is likely that the utility from a year in perfect health will be higher when combined with a higher amount of income, whereas we assume a constant marginal rate of substitution between health and income. Relaxing this assumption would require us to estimate an indifference curve across a range of values, which is beyond the scope of this first empirical exploration of the method.
The compensating gain data from TTO2 is analysed in a similar fashion to the equivalent loss data in TTO1. Consider a respondent who is indifferent between 10 years with their current income and 9 years with 120% of their current income. Their income is, once again, €100,000 per year: 10U (PH) + €1,000,000 = 9U (PH) + €1,080,000 10U (PH) -9U (PH) = €1,080,000 -€1,000,000

Respondent Income
In order to determine the level of "current annual income" for each respondent, respondents were asked to choose the income bracket within which their monthly income fell in the background characteristics questions. For our analysis these income brackets were converted into numerical values using the mid-point of each bracket [37]. For respondents in the lowest income bracket an income of two thirds of the upper limit of the bracket was used. For respondents in the highest income bracket an income of 1.5 of the lower income limit of the bracket was assumed [37].

Non-Traders
Some respondents did not trade any time in any of the TTO exercises. For these respondents, calculating an MVQ becomes problematic because the left hand side of equation (2)   It should be noted that non-trading in the Equivalent Variation for a Loss or Compensating Variation for a Gain questions does not necessarily mean that the indifference curve is perfectly vertical as in Figure 2 above, it just means that the curve is sufficiently steep that the utility gained from the increase in income is less than the amount of utility that would be lost through giving up the smallest amount of longevity possible (the smallest unit of trade was one month). Furthermore, non-trading for a given income change level does not mean that the entire indifference curve is vertical (or sufficiently steep) as in Figure 2, it only determines the slope of the indifference curve between the two income points on the y axis that the respondent is being questioned on.
Regardless of whether non-trades are protest responses or a true reflection of lexicographic preferences, if an individual calculation method (i.e. calculate an MVQ for each individual and then compute the mean) is to be used, then non-traders must be excluded, because their answers would imply an infinite MVQ [38]. Therefore, we excluded all 'extreme non-traders' (i.e. respondents who did not trade across all 14 TTO questions). An alternative is to use an aggregate approach (i.e. compute the mean income and the mean number of years traded and then divide these means on each other). Results are presented from both approaches.

Negative Values
One further problem of our approach is the potential generation of     income.

Discussion and Conclusion
The aim of this study was not to present a definitive MVQ for the Netherlands, but to test the feasibility of an alternative method of eliciting an MVQ. The results from the small-scale online study suggest that the compensating gain and equivalent loss TTO exercises have potential, but a number of problems must be overcome before its use can be more widely advocated, other than for research purposes. Generally, respondents in our new method gave up more years when faced with a larger income change level rather than a smaller income change, suggesting some sensitivity to scope. However, these differences were not always significant and never significant without the 'non-traders', due to the small numbers in the sample. Surprisingly, we did not find a clear relation between respondents' income and MVQ. Maybe this is related to the relative small sample size of our explorative study. Studies with larger sample sizes may be able to provide more insight into the relationship between income and MVQ values generated with this new approach. Moreover, it would allow further investigation of sensitivity to scope in the TTO method in this context.
Since respondents are forced to consider giving up years of life from a finite 10 year survival, one could claim that the introduced method here forces respondents to trade-off income and health in a very direct way. Furthermore, the method makes strategic behaviour difficult as it is not obvious to the respondent how the results from the exercise will be used, although the results from this feasibility study do not allow us to specifically test this.
Amongst the analysed sample (excluding 80 'extreme non-traders'), 60% of responses in the equivalent loss and compensating gain questions were non-trades. This is considerably higher than the 35% found in the study by Dalmau-Matarrodona [21] in the context of a WTP exercise. We have no means of determining what proportion of these trades revealed true lexicographic preferences and what proportion were protest responses. The high proportion of non-trades may also be related to the use of an online survey. Van Nooten et al. [39] found that numerous respondents opted not to trade in conventional TTO exercises in their online questionnaire. It may well be that trading off life time for income is considered in some way 'unethical' by respondents or a trade-off they are even less willing to make than trading off length and quality of life. This requires further investigation.
A serious problem with the TTO based approach, and one not encountered when using WTP, is the elicitation of negative MVQ values. It is not easy for respondents to see that they are making choices that imply negative valuation of health, which they may not support if they were shown the implication. This is where the proportion of health traded off exceeds that of the income change. However, in reality it is plausible that individuals may wish to live for a shorter period of time with higher income than for a longer period of time with lower income, even though their total lifetime income may be lower. For instance, they may feel that the lower income is not enough to be able to sustain themselves and their significant others. This also relates to the shape of the utility function assumed here. The additive, linear utility function may not adequately describe peoples' actual preferences. In addition, the zero discounting assumption we used here may not hold. If respondents instead discount future income very steeply, a short lifespan with high yearly income will give more discounted utility than a long lifespan with a lower yearly income. It is also likely that respondents may not have been able to calculate exactly at which point their lifetime income in one prospect became lower than that in the other prospect. In that sense, applying this method in an interview elicitation procedure, potentially using visual aids and providing feedback to respondents whose answers imply negative WTP, could support the decision making process of respondents. This may reduce the number of respondents trading 'too many years', yielding negative valuations, but not being aware of this implication.
In this study respondents were told to imagine being in perfect health in both scenarios. In future work it may be preferable to tell respondents they would be in their own also looking at the shape of the utility function over income and health. An interview based study that requires respondents to engage in an iterative process, and that can be supplemented by a visual aid, is required to determine whether this approach is valid and should be taken forward, also as an alternative for WTP valuations.