Resource Allocation in Public Sector Programmes: Does the Value of a Life Differ Between Governmental Departments?
This research paper examines whether value of a life estimates used in economic evaluation differs between government departments in a selection of developed countries. The authors find that generally estimates used in transport and the environment exceeded those used in health, which suggests that health may be undervalued by departments of health compared to departments of transport or environment.
Across government departments, economic appraisals are used to inform resource allocation with the aim of ensuring money is invested in programmes providing good value for money. To assess the value of different programmes, departments conduct assessments, whereby the costs of a new programme are compared with the benefits it is expected to provide. Many government health agencies employ cost-effectiveness analysis, whereas other departments often employ cost-benefit analysis. Irrespective of the type of department, or the type of analysis being conducted, it is inevitable that a monetary value is applied to life and health because new programmes often impact population health, be it directly (e.g., new health interventions), or indirectly (e.g., new transport infrastructure).
Our new research paper examines whether there are differences in the value of life estimates recommended for use across government departments in Australia, Canada, Japan, New Zealand, South Korea, the Netherlands, and the UK. The departments of interest were those known to use some form of valuation of human life: health, social care, transport, and environment. For each country, a literature review was conducted to identify evidence from technical reports, guidelines, and tools published directly by government departments indicating methods for conducting impact assessments or appraisals.
The authors found that the values used in transport and environment typically exceeded those used in health, often by a significant enough proportion to be a multiple thereof. For example, in the UK, the value considered in the health sector was between 27-41% of that used in transport when converted to one common metric, where the health value was based on the £20-30,000 per quality-adjusted life year NICE threshold, and the latter was based on the value of a statistical life from The Green Book. The authors only identified two instances where the value in health exceeded values used in transport or environment. A similar trend was observed for the other health estimates that were identified when compared with those used in transport or environment.
The process of determining the goals of public spending and how budgets are allocated across different public services is a major public policy challenge. This research paper highlights the current gap and inconsistency in the evidence used to assess value for money across public sector activities. Alternative approaches to improve the evidence base informing value for money assessment that cut across a number of public sectors are needed. New approaches should entail the identification of a core set of outcomes (such as ‘health’) which could be used to measure and compare disparate public sector activities. Evidence on public preferences for different public sector outcomes could also assist comparisons of value for money.
Zhang, K. and Garau, M., 2020. International cost-effectiveness thresholds and modifiers for HTA decision making. OHE Consulting Report, London: Office of Health Economics. Available at: https://www.ohe.org/publications/international-cost-effectiveness-thresholds-and-modifiers-hta-decision-making
Berdud M., Ferraro J., Towse A. 2020. A theory on ICER pricing and optimal level of cost-effectiveness threshold: a bargaining approach. OHE Consulting Report, London: Office of Health Economics. Available at: https://www.ohe.org/publications/bargaining-approach-theory-icer-pricing-and-optimal-level-cost-effectiveness-threshold
Cubi-Molla, P., Mott, D., Henderson, N. et al. Resource allocation in public sector programmes: does the value of a life differ between governmental departments?. Cost Eff Resour Alloc 21, 96 (2023). https://doi.org/10.1186/s12962-023-00500-5