What do we value in healthcare? An economic perspective

“Value” is cited in many hard decisions in the NHS. What gets covered by the service and what does not? What should we encourage doctors to take up as best practice, or phase out as outdated? John Appleby, chief economist of the Nuffield Trust, examines how value is defined in healthcare and how it impacts everyday services.

There is no objective definition or measure of value. You could say that it is about the ratio of outcomes to financial cost, but that throws up the deeper question of what values we use to define a good outcome. We each have our own set of values which we know intuitively, but it is far from straightforward to pool these at a social level to make decisions in a national institution. How do you measure the desires of one person against those of another, and whose count for how much?

Economists and social scientists have come up with several different more objective ways to define and measure value. Many of these ideas of value are actually used in today’s NHS – but they all have their weaknesses.

Pay your money, take your choice

The economist’s traditional approach to defining value is to look at the choices people make. If you choose to spend £3 on a cup of coffee, you indicate how highly you value it relative to other things you could have spent your money on.

Choice is a reality in some parts of the NHS. People have rights to choose between different GP practices, and between hospital trusts for specialist care. Through the tariff or primary care allocation formula, money then follows the patient to the practice or hospital they choose: a conscious effort to allocate funding based on the revealed values of patients.

... there is no perfect way to decide value in the NHS. But rather than see this as a problem, we should accept that a balancing act may be the best way to deal with the fact that value cannot ever be simply calculated for a whole service or society

John Appleby, chief economist at the Nuffield Trust

But this type of consumerism is not a widespread driver of decisions in the NHS, and there are good reasons for this. In the 1960s the economist Kenneth Arrow famously pointed out that health care is different from other sectors. Unlike with other sectors, people cannot test the product or change their minds later: you experience medical care at the moment it is produced, and the costs of making the wrong choice could be fatal. Furthermore, people understand far less about medicine than the doctor treating them, so they are in a poor position to know what to demand and why.

Why not just ask?

If we can’t just rely on people’s actual choices to measure value, why not just ask them how much they value different health outcomes? This is what the National Institute of Health and Care Excellence (NICE) does in order to produce the measures of value that decide whether drugs and treatments are approved under its technology appraisal process.

NICE use large population studies which ask people whether they would rather live for a certain number of years with a particular condition, or a smaller number of years in perfect health. At the point where people cannot decide, this provides a measure of how many years with a particular condition are valued as much as a year of perfect health – enabling them to calculate the “quality adjusted life years” different treatments can provide. In theory, at least, this allows them to know whether a treatment will reduce suffering more than the alternatives available at the same price, and recommend or not based on this.

But this has its limits. NICE has been criticized for how long their processes take and the difficulty they have when evidence is incomplete, perhaps because of a small number of patients. While it might work for specific treatments with evidence of exact results, it is much harder to apply this methodology to the immensely complicated outcomes of higher level decisions – like whether to fund general practice or hospitals, or whether to centralize trauma services.

Voting for values

Another way we decide on values as a society is through the democratic political system. In fact what lies behind many important decisions in the NHS, from waiting times targets to its very creation, has always been the political mandate of the Government.

Social scientists have suggested that democracy will often result in governments which reflect the centre of public opinion, as political parties try to build the biggest possible coalition of support. But this is a very blunt mechanism which only really works on one dimension of policy at a time. If a party has policies to command broader support than its opponent for most areas, this could outweigh a health policy which is not widely supported.

With normal lives to lead, voters will never be more than partially informed about NHS policies and services.

John Appleby, chief economist at the Nuffield Trust

Meanwhile, the same considerations of uncertainty and lack of information on the part of the public again apply. With normal lives to lead, voters will never be more than partially informed about NHS policies and services.

Doctor’s orders

Of course, in reality, many crucial decisions in the NHS are taken by individual clinicians based on their own values and sense of the patient’s interests. Kenneth Arrow believed that we have to trust clinicians in this way because of the uncertainty patients face. He saw the social institution of the medical profession, with its code of ethics and strict controls on who can practice, as a way to make sure that doctors had altruistic values which would tend to drive them towards good choices.

But of course doctors, like anybody else, will have their biases. At an individual level most medics will find it easy to think of a colleague who they think over-emphasises certain procedures and concepts. Collectively there is evidence that medics on average can be swayed by pharmaceutical sales representatives to prescribe certain products more.

And doctors are no experts in the question of how much different treatments cost or in how the public finances work – yet these issues too must be factored into decisions about value.

Taking it all together

In short, there is no perfect way to decide value in the NHS. But rather than see this as a problem, we should accept that a balancing act may be the best way to deal with the fact that value cannot ever be simply calculated for a whole service or society. As well as asking which treatments and decisions represent good or bad value, we should also ask – according to who? Based on what? And how else could we look at the same problem?

John Appleby is the director of research and chief economist at the Nuffield Trust. Follow him on Twitter at @jappleby123

This blog was originally published on the Our Future Health website.