title: Toward a Hedonic Value Framework in Health Care.
abstract: In well-functioning markets, a hedonic pricing scheme can reflect the marginal valuation of various attributes of a differentiated product at market equilibrium. It serves as an important tool to inform pricing of a new product with a specific combination of attributes. Because health cannot be bought and sold in a market setting, and health care markets are distorted by insurance or government subsidies, direct valuation of a health intervention as a differentiated good through observed market prices is difficult. In this article, we discuss the rationale of using stated preference methods for developing a hedonic value framework for health insurance products to inform the decision on whether a product should be covered or subsidized by insurance, given its price. This value index will not reflect marginal value at market equilibrium, as in a hedonic pricing scheme, but would capture the distribution of marginal value in the population. We discuss how affordability concerns can be integrated into the development of a hedonic valuation model. We compare this framework with traditional cost-effectiveness analysis and also the existing value frameworks put forth by various organizations. The framework can be adopted to inform other decisions such as pricing. We argue that developing such a comprehensive and decision-theoretic value framework is feasible and, if successful, can serve to inform health care resource allocation in this country for decades to come in a systematic manner.
authors.affiliation: Pharmaceutical Outcomes Research and Policy Program, School of Pharmacy and Department of Health Services, University of Washington, Seattle, WA, USA; Department of Economics, University of Washington, Seattle, WA, USA; National Bureau of Economic Research, Cambridge, MA, USA. Electronic address: basua@uw.edu.
authors.forename: Anirban
authors.initials: A
authors.lastname: Basu
authors.affiliation: Pharmaceutical Outcomes Research and Policy Program, School of Pharmacy and Department of Health Services, University of Washington, Seattle, WA, USA.
authors.forename: Sean D
authors.initials: SD
authors.lastname: Sullivan
mesh_terms: D003132:Commerce; D003362:Cost-Benefit Analysis; D003661:Decision Support Techniques; D003695:Delivery of Health Care; D004465:Economic Competition; D019458:Insurance Coverage; D007348:Insurance, Health; D008962:Models, Theoretical; D055553:Prescription Drugs; D013673:Technology Assessment, Biomedical / Q000379:methods*; D014481:United States; D062505:Value-Based Purchasing
chemical_list: D055553:Prescription Drugs
keywords: hedonic pricing; insurance; value; value framework