Caring externalities in health economic evaluation: how are they related to severity of illness?

Fredric Jacobsson, John Carstensen, Lars Borgquist

In health economic evaluations, altruistic preferences in the form of caring externalities, i.e. that people care about others' health, is usually not taken into account. In this study we examined how people value their own and others' health. This pilot study was carried out by letting people answer willingness to pay (WTP) questionnaires where internal WTP (own health) and altruistic WTP (others' health) were isolated and examined. A common method used in health economic evaluations is cost-utility analysis, which is based on the maximisation of QALYs. QALY maximisation may be appropriate if altruistic preferences are non-existent or if they are linear in relation to internal preferences (QALYs gained). We found evidence for the existence of altruistic preferences and that these preferences were relatively higher for severe health states (and lower for mild states of health) compared to internal preferences, i.e. when severity of illness increased, the relative increase in caring was higher concerning others than oneself. The difference was statistically significant (P<0.001). Our results indicate that more attention and resources should be directed to severe health states, as compared to mild health states, than advocated by internal preferences in order to obtain more efficient resource allocation in the health care sector.