Axioms for health care resource allocation

We examine welfare theoretic foundations for solutions to the health care resource allocation problem based on measures of quality adjusted life-years (QALYs). Conditions for representing the individuals’ preferences by QALY measures, as well as conditions for the existence of a social welfare function being a function of the individuals’ QALYs only are established. The QALY measures represent deterministic individual utility; no reference to the expected utility hypothesis and risk neutrality with respect to life-years is made. A solution suggested by Dolan (1998) to the health care resource allocation problem is characterized by an axiom stating that the social welfare of life-years distributions is anonymous with respect to the individuals’ health states. By replacing this axiom with an axiom of non-age discrimination, we obtain a characterization of the utilitarian solution to the health care resource allocation problem. If neither of these two axioms are acceptable, under quite mild alternative assumptions there exists a social welfare function which is the sum of power transformations of the individuals’ QALYs. The latter result is obtained as an application of a theorem due to Roberts (1980).