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Cost-Effectiveness Analysis in Health Care Based on the Capability Approach

DOI 10.1055/s-0033-1355421 Gesundheitswesen 2014; 76: e39–e43 For personal use only. No commercial use, no depositing in repositories.

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Original Article e39

Cost-Effectiveness Analysis in Health Care Based on the Capability Approach Kosten-Nutzen-Analyse im Gesundheitswesen basierend auf dem Capability Approach

Author

A. Gandjour

Affiliation

Management Department, Frankfurt School of Finance & Management, Frankfurt, Germany

Key words ▶ resource allocation ● ▶ cost-effectiveness ● ▶ capabilities ● ▶ utilitarianism ●

Abstract

Zusammenfassung

It is well known that Sen’s capability approach and preference utilitarianism have different distributional values. The purpose of this paper is to discuss how Sen’s capability approach might be operationalised for allocation decisions and costeffectiveness analysis in health care. The paper identifies several requirements for measuring health or well-being in line with the capability approach. Among them is the need for objective assessments of capabilities. This paper also shows that from the perspective of the capability approach a portion of productivity changes are irrelevant for allocation decisions.

Bekanntermaßen haben der Capability Approach nach Sen und der Präferenzutilitarismus unterschiedliche Verteilungsimplikationen. Ziel dieser Arbeit ist es zu diskutieren, wie der Capability Approach nach Sen für Allokationsentscheidungen und Kosten-Nutzen-Analysen im Gesundheitswesen operationalisiert werden kann. Es werden mehrere Anforderungen an die Messung von Gesundheit und Wohlbefinden nach dem Capability Approach identifiziert. Dazu zählt die objektive Messung von Capabilities (Verwirklichungschancen). Diese Arbeit zeigt auch, dass aus Sicht des Capability Approach ein Teil der Produktivitätsgewinne irrelevant für Allokationsentscheidungen ist.

Introduction

quality of life and well-being in the context of poverty, deprivation, and oppression. Today, the approach serves as an inspiration for different social policy issues including resource allocation decisions in health care. Sen developed the capability approach out of his criticism of both utilitarianism and Rawls’s Theory of Justice [11]. With regard to utilitarianism he criticizes the narrow evaluation space, which is restricted to utility [12] and does not account for the fact that people adapt to their circumstances [12, 13]. When measuring preferences, subjective well-being, or welfare, people may therefore report a high level of well-being despite experiencing what may be objectively or from an external viewpoint a low level of wellbeing. Sen provides the example of a cripple who has a jolly disposition or a low aspiration level and thus is no worse off than others in utility terms despite his physical handicap [12]. Measuring well-being in terms of capabilities and functionings such as good health, good nourishment, self-respect, and social integration [14] is supposed to avoid this

Schlüsselwörter ▶ Ressourcenallokation ● ▶ Kosten-Effektivität ● ▶ Capabilities ● ▶ Utilitarismus ●

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Bibliography DOI http://dx.doi.org/ 10.1055/s-0033-1355421 Online-Publikation: 28.10.2013 Gesundheitswesen 2014; 76: e39–e43 © Georg Thieme Verlag KG Stuttgart · New York ISSN 0941-3790 Correspondence Prof. Afschin Gandjour Management Department Frankfurt School of Finance & Management Sonnemannstrasse 9–11 60314 Frankfurt Germany [email protected]

The traditional goal of resource allocation in health care has been to maximize health or utility in view of limited resources. The underlying ethical principle is utilitarian [1]. Utilitarian theories consider an action to be right if and only if it produces more utility (or welfare or wellbeing) than any alternative act. Hence, the goal of utilitarianism is to maximize total utility. Utility (or welfare or well-being) can be defined, e. g., by pleasure or happiness (hedonistic or classical utilitarianism) or satisfaction of preferences (preference utilitarianism). Several authors have raised concerns about the equity implications of utilitarianism in health care and have argued that it may be necessary to take into account other equity aspects when allocating health care resources [2–4]. Recently, several authors have drawn on Sen’s capability approach to derive resource allocation principles in health care [5–10]. The original purpose of the capability approach was to assess a person’s

Gandjour A. Cost-Effectiveness Analysis in Health … Gesundheitswesen 2014; 76: e39–e43

e40 Original Article

problem. That is, while utilitarianism has a narrow evaluation space, the capability approach can have a multidimensional evaluation space which captures a broad range of capabilities. Recently, Coast et al. [15] identified several challenges in applying the capability approach to the evaluation of health care programs. Among them were: whether to assess functionings or capabilities; how to decide which capabilities should be evaluated; how to measure these capabilities; whether or how to value these capabilities; and whether or not to anchor any resultant index. The purpose of this paper is to deal with these challenges and discuss how the capability approach and its distributional values might be operationalized for allocation decisions and costeffectiveness analysis in health care. To this end, the paper makes a distinction between the measurement and valuation of capabilities. The paper is structured as follows. First, it presents the capability approach in more detail. Second, it discusses the requirements of measuring health or well-being in line with the capability approach. And third, it discusses approaches of how to consider the degree of capability deprivation in cost-effectiveness analysis and allocation decisions.

The Capability Approach

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Sen argues that well-being should be measured in terms of capabilities and functionings. The difference between capabilities and functionings is perhaps best expressed in Sen’s [13] own words: “A functioning is an achievement, whereas a capability is the ability to achieve. Functionings are, in a sense, more directly related to living conditions, since they are different aspects of living conditions. Capabilities, in contrast, are notions of freedom, in the positive sense: what real opportunities you have regarding the life you may lead” (p. 36). Sen defines the “capability set” as a mathematical set of the alternative functioning vectors a person can choose from [16]. Sen [13] illustrates the difference between capabilities and functionings by the example of “2 people both of whom are starving – one without any alternative (since she is very poor) and the other out of choice (since he is very religious in a particular style). In one sense their functioning achievements in terms of nourishment may be exactly similar – both are undernourished. (…). But one is ‘fasting’ and the other is not.” It is the person without alternative (the one who is not voluntarily ‘fasting’) who has a limited set of capabilities. In the case of central capabilities (such as health) capabilities and functionings usually tend to overlap, because if someone has the opportunity to achieve them if they have to choose, he will probably choose them [17]. Sen also makes a distinction between well-being and agency [18]. While capabilities primarily refer to the freedom to achieve things that are constitutive to one’s own well-being (well-being freedom), agency freedom is the freedom to achieve things that do not directly contribute to one’s well-being, e. g., helping others [19]. The corresponding achievement is called agency achievement and deserves independent consideration according to Sen. In addition to capabilities (which represent the opportunity aspect of freedom) Sen also values the process aspect of freedom, consisting of “autonomy of decision” and “immunity from encroachment” [20]. Sen [21, 22] acknowledges that the capability approach is deficient in not giving priority to this process aspect of freedom. In this sense, the capability approach is incomplete.

With reference to health and health care, Sen [21] defines capability as the opportunity an individual has to achieve good health. At the same time, however, Sen [21] acknowledges that health is required to obtain freedom of choice. Hence, he considers health both a result and a prerequisite of other capabilities [23]. Disease can limit an individual’s capability set, which contains all potential functionings, both directly and indirectly (indirectly through less efficient conversion of commodities into capabilities [23]). Disease thus can also limit the set of achieved functionings chosen from the capability set. While the capability approach was developed in order to exclude adaptive preferences [12], it does not entirely do so as it allows for the possibility to aggregate the various functionings. Aggregation can be done both by the individual (the so-called selfevaluation approach) or the community (standard-evaluation approach). Sen [13] argues that both approaches have some relevance of their own. Aggregation requires attaching relative weights to functionings and thus making trade-offs between them [24]. That is, less of one capability is acceptable if there is more of another capability. The self-evaluation approach potentially rules in adaptive effects [25] because people who have adapted to low levels of certain functionings may devalue them compared to other functionings. Similarly, the standard-evaluation approach allows relativism and community standards to affect aggregation [24] and thus incorporates adaption at the community level. In contrast, Nussbaum’s conceptualization of capabilities does not allow any trade-offs between capabilities [26] – at least up to a threshold level for each capability [27]. Instead, she suggests a list of central human capabilities that individuals have reason to choose and value under any circumstances. She argues that these capabilities cannot be abridged or abrogated below the threshold for capabilities outside her list [28]. Nussbaum’s list [26, 27] includes the following 10 central human capabilities: life; bodily health; bodily integrity; senses, imagination and thought; emotions; practical reason; affiliation; other species; play; and control over one’s environment.

Measuring Capabilities

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In the following we discuss how measures of health or wellbeing need to be designed in order to be compatible with the capability approach. We identify several requirements: i) multidimensionality; ii) consideration both of health and non-health capabilities; iii) objective descriptions of capabilities; and iv) conceptualization of dimensions and items based on informed preferences. We use quality-adjusted life years (QALYs) as an example to demonstrate these requirements as QALYs have been often discussed as an outcome measure for the capability approach [5–7]. However, all points we make equally refer to alternative index measures that have been developed based on Sen’s capability approach (e. g., [10]). As far as the first requirement is concerned, a multidimensional evaluation space is a distinct feature of the capability approach. When QALYs are calculated based on multidimensional preference measures such as the EQ-5D, they directly account for this requirement. Yet, when QALYs are calculated based on direct preference measures such as the time trade-off (TTO) method [29], the standard gamble (SG) method [30], or visual analogue scales, they do not fulfill this criterion.



In terms of the second requirement, Cookson [6, 7] argued that multidimensional preference measures such as the EQ-5D account for both health and non-health capabilities. Each dimension can be thought of to represent another capability. Nonhealth capabilities are accounted for both directly (by dimensions such as ‘usual activities’) and indirectly (by health-related dimensions) [6]. That is, respondents may well consider that better health increases their capability set (well-being freedom) and their agency freedom [31], i. e., the freedom to achieve things that do not directly contribute to one’s well-being. Still, one may argue in line with Anand [5] that multidimensional preference measures should include additional capabilities (such as those included the list of central human capabilities by Nussbaum) in order to force respondents to explicitly consider the entire capability set. On the other hand, when QALYs are defined strictly as a measure of health [2, 32], they do not measure non-health capabilities [33]. Concerning the third requirement for a measure of health or well-being in line with the capability approach (objective descriptions of capability deprivation), it is important to note that QALYs calculated by multidimensional preference measures such as the EQ-5D do not rule out adaptive effects. This is against the original idea of the capability approach. For example, patients with deficits in physical health may rule in adaptive effects by lowering expectations and reporting fewer problems, e. g., on their ability to move [34]. In order to avoid capturing such adaptive effects, the EQ-5D and other multidimensional preference measures need to introduce objective descriptions of quality-of-life deficits, e. g., walking distances, instead of having subjective assessments. Still, domains describing psychological problems (such as anxiety/depression in the EQ-5D or emotion in the Health Utilities Index Mark 3 [35]) cannot be stated in an objective way and may also capture an adaption to physical limitations (i. e., patients may report less depression over time). Thus, mental health assessment needs to be excluded. In order to aggregate the various objective dimensions they need to be weighted by the individual (self-evaluation approach) or the community (standard-evaluation approach) [13]. For example, one needs to assess what the value of let’s say 100 meters walking distance is compared to being independent in activities of daily living. As these subjective assessments are only captured in the weighing function this approach is compatible with Sen’s capability approach. The weighting function would also indirectly account for psychological problems as a response to physical limitations. That is, depending on the degree of (mal)adaptation, weighting of a physical limitation changes. Further research needs to evaluate potential problems with capturing psychological problems in the weighting function as opposed to separate domains. The fourth requirement of a health or well-being measure based on the capability approach is that informed preferences need to define the dimensions of the measure. Informed preferences play an important role in valuing freedom and its benefits [36, 37]. Informed preferences (also called rational, ideal, true, or hypothetical preferences) have been defined by Harsanyi [38] as "hypothetical preferences [a person] would entertain if he had all the relevant information and had made proper use of this information” (p. 286). Still, the definition of informed preferences is not uniform [39]. In some cases requirements for informed preferences are very demanding, e. g., having the best possible logical analysis of information [40]. As QALYs are a measure of individual preferences under certain conditions [41],

they are in principle able to fulfill this requirement. This also applies to QALYs calculated based on multidimensional preference measures such as the EQ-5D (see the first requirement). A final requirement of a health or well-being measure is based on Nussbaum’s conceptualization of capabilities. She does not allow for trade-offs between capabilities up to a certain threshold level. That is, she avoids aggregation of capabilities and construction of an index score [26, 27]. Hence, capabilities need to be measured separately and not be aggregated. QALYs are not compatible with this conceptualization because they require the aggregation of functionings and construction of an index score.

Valuing Capabilities

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In the following we discuss potential ways of considering the value implications of the capability approach in cost-effectiveness analysis and resource allocation decisions including a priority for people with low achievements. As pointed out by Coast et al. [42], simple maximization of capabilities without a concern for the distribution of capabilities is inadequate. Nussbaum’s suggestion is to provide a minimum threshold level of capabilities for everyone. This approach would not require considering resource use for capability levels below the threshold, however. It implies that resources do not matter (we are willing to pay any amount of dollars to make Nussbaum’s list of capabilities available). But given that resources are, in fact, limited, trade-offs need to be made (implicitly) and thus may result in fewer capabilities overall. Sen, on the other hand, is somewhat reluctant to disregard resource use. For example, he criticized Rawls’s position to “give total priority to the minutest gain of the worst-off group” [19]. Yet, Sen offers little concrete guidance on the terms of the efficiency-equity trade-off. Hence, there is much room for speculation on how to consider the degree of capability deprivation in cost-effectiveness analysis. Essentially, there are 2 possibilities for cost-effectiveness analysis to consider the degree of capability deprivation, one in the denominator of the cost-effectiveness ratio and the other in the numerator. As far as the denominator is concerned, one could introduce distributional weights which reflect the relative importance given to people with deprived capabilities. Distributional weights could weigh QALYs or any other measure of health or well-being based on the capability approach. Such an approach was recently suggested by Alkire [43] for poverty measures. While Sen does seem to oppose the use of distributional weights in outcome measurement in health care [21], there is again much room for speculation as far as operationalization is concerned. In any case, it would be consistent with the capability approach to determine distributional weights based on informed preferences. Whether or not distributional weights determined in such a way can also be consistent with preference utilitarian theory is controversial. Some authors (e. g., [44]) have argued to exclude external preferences (i. e., preferences for assignment of goods and opportunities to others [44]) in preference utilitarianism because of the occurrence of double counting of utility: each person will have the benefit not only of his own preference, but also the preference of someone else who takes pleasure in his success [44]. On the other hand, Ng [45] argues that not all external preferences result in double counting. In a similar notion, Johansson [46] suggests that consideration of paternalis-


e42 Original Article

tic altruism, which ignores preferences of other people, does not result in double counting. As far as the numerator of the cost-effectiveness ratio is concerned, the operationalization of the capability approach is perhaps somewhat clearer. The basic question is whether or not to include direct and indirect health care costs as a result of an individual’s capability enhancement. As Sen acknowledges resource scarcity with respect to providing capabilities, costeffectiveness analysis needs to consider contributions to resource availability and thus reductions in direct and indirect costs. On the other hand, while some of the productivity gains represent a contribution to resource availability (in terms of taxes or donations), a major proportion is consumed by the individual. This portion of indirect costs would need to be excluded from the analysis. Based on QALYs as a measure of outcome we obtain for the cost-effectiveness ratio: ⌬costs ⌬direct costs ⫺⌬taxes ⫺⌬donations = ⌬QALYs ⌬QALYs

Conclusions

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This paper discusses the operationalization of the capability approach and its distributional values for allocation decisions in health care. The paper identifies several requirements for measuring health or well-being in line with Sen’s capability approach. Compared to preference utilitarianism, the capability approach suggests excluding i) direct preference measures (such as the TTO and SG method) and ii) subjective dimensions in multidimensional measures of health or well-being. The other 2 requirements, which are consideration of non-health capabilities and use of informed preferences, are in line with preference utilitarianism. Note that psychological responses to physical limitations would still be captured in Sen’s capability approach (in the weighting function). Hence, it is psychological problems without physical basis that would be excluded. Certainly, this exclusion restricts applicability of the capability approach for the purpose of allocating resources in health care. There has been a debate [6, 15] on whether measurement of the capability set may focus only on valued functionings (Sen calls this approach “elementary evaluation” [47] or whether nondesired opportunities should also be included. We take the position of others who argued that in case of central functionings (such as health) it is sufficient to include only those functionings that are valued [17, 48]. The paper also argues that cost-effectiveness analysis based on the capability approach justifies the use of distributional weights and the exclusion of a portion of productivity gains. As discussed, distributional weights can also be consistent with preference utilitarianism. An open question for future research is to what degree to consider resource use by the individual when providing capabilities. This question has important implications for the consideration of indirect costs in cost-effectiveness analysis based on the capability approach. An answer to this question, however, seems to require further development of the capability approach itself.

Interessenkonflikt: Der Autor gibt an, dass kein Interessenkonflikt besteht.

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