Models of Quality-Adjusted Life Years when Health Varies Over Time: Survey and Analysis

Kristian Schultz Hansen, Lars Peter Østerdal

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Quality-adjusted life year (QALY) models are widely used for economic evaluation in the health care sector. In the first part of the paper, we establish an overview of QALY models where health varies over time and provide a theoretical analysis of model identification and parameter estimation from time trade-off (TTO) and standard gamble (SG) scores. We investigate deterministic and probabilistic models and consider five different families of discounting functions in all. The second part of the paper discusses four issues recurrently debated in the literature. This discussion includes questioning the SG method as the gold standard for estimation of the health state index, re-examining the role of the constant-proportional trade-off condition, revisiting the problem of double discounting of QALYs, and suggesting that it is not a matter of choosing between TTO and SG procedures as the combination of these two can be used to disentangle risk aversion from discounting. We find that caution must be taken when drawing conclusions from models with chronic health states to situations where health varies over time. One notable difference is that in the former case, risk aversion may be indistinguishable from discounting.
Original languageEnglish
JournalJournal of Economic Surveys
Issue number2
Pages (from-to)229–255
Publication statusPublished - 2006
Externally publishedYes


  • Medical decision making
  • QALY
  • Standard gamble
  • Time trade-off
  • Constant propertional trade-off
  • Double discounting

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