Seminar

“QALYs Versus Experience: A Perspective From Experimental Economics”

The OHE Annual Lecture is a focal point of the OHE calendar. It provides an opportunity for the OHE’s stakeholders to hear opinion leaders present their views and ideas on a topic related to our work in the fields of health care policy, health technology assessment, and pharmaceutical industry economics, pricing and regulation. The lecture brings together a unique gathering of experts and interested parties, allowing decision makers within the pharmaceutical industry and health care policy makers to exchange ideas and concerns, with the aim of working towards a common set of policy objectives.

The OHE 2007 Annual Lecture “QALYs versus experience: a perspective from experimental economics”, was given at the Royal College of Physicians on 13th June by Professor Daniel Kahneman, Nobel Prize Winner in Economics and Eugene Higgins Professor of Psychology, Woodrow Wilson School, Princeton University. Professor Kahneman is winner of the 2002 Nobel Prize in Economic Sciences for his pioneering work integrating insights from psychological research into economics, especially around decision-making under uncertainty. Much of his work was been carried out in collaboration with Amos Tversky.

Professor Kahneman has been the recipient of numerous awards in addition to his Nobel Prize, among them the Distinguished Scientific Contribution Award of the American Psychological Association, the Warren Medal of the Society of Experimental Psychologists, and the Hilgard Award for Career Contributions to General Psychology.

In recent years, the primary focus of his research has been the study of various aspects of experienced utility.

His OHE Annual lecture 2007 began by introducing a distinction between two classical concepts of utility. The first of these is “decision utility” – a value that is inferred from choices. It is used to explain choices and is the standard meaning of utility within modern economics. The other meaning of utility is as a measure of experience - a measure of pleasure and pain. Professor Kahneman began by pointing out that QALYs, as usually measured, are a measure of decision utility derived from preferences.

One question for debate was “Whose decision utility?” i.e. whose preferences are we trying to satisfy? In terms of healthcare, the question “are we interested in patients’ preferences?” was posed i.e. are we interested in what patients believe about their state of health and what trade-offs they would be willing to accept between remaining in their current state of health or spending a shorter time in perfect health, and so on?

Alternatively, is it the preferences of the public we are seeking to elicit? Professor Kahneman observed that in the UK, as in most other places, it is the public that is consulted about states of health and that there is no guarantee that public preferences are the same as patients’ preferences. He discussed the substantial discrepancies between the QALYs that would be inferred from patients’ decisions and the QALYs that would be inferred from the public’s decision, reflecting a systematic discrepancy between public preferences and patient experience.

In addition to highlighting the contrast between patient and public preferences, Professor Kahneman drew a distinction between the properties normally assumed to underly preferences and the way in which Prospect Theory attempts to account for observed violations of these properties. He also explored the differences between preferences and experienced utility, discussing Remembered Utility, the “day reconstruction method”, for recording experiences, and focusing illusion.

Some of the differences arose because:

_ people adapt to their circumstances;
_ health becomes more important if we ask about it;
_ people quickly forget how they feel at the time.

He concluded with a list of the requirements that we would ideally like a measure of the utility of health states to satisfy. It should:

_ give the same results for the public and for patients;
_ correspond to the impact patients experience from health state changes;
_ conform to the axioms of utility theory;
_ be easily and sensibly translated into money.

In Professor Kahneman’s view, what we are trying to measure simply does not exist. There is no metric that satisfies all these requirements. He therefore raised the question of what we are to do if in fact life is much more complicated than it would be if all these criteria were fulfilled. ltimately, his view is that this is a policy issue that has to be decided in the way that policy issues are normally decided. This implies that decision utilities and experienced utilities are inputs into the decision making process. However, if we admit that, at the level of the individual there is no single number that represents the utility of a health state, then the policy maker has to make decisions about the trade-offs between different measures of utility. Professor Kahneman concludes that the first step is to determine if we do really think that there is such a number. Will we go on trying to measure it, or are we going to accept that life is much more complicated, and think about how to help policy makers get a better understanding of the value of health interventions?