Decision Maker

Decision Maker in Health Economic Evaluation

In health economics a decision maker is the accountable person or body that chooses between options, as distinct from the analyst who estimates what each option would do. An evaluation is built around that decision maker's objectives and constraints, so the same evidence can be framed differently for NICE, a minister or a local commissioner. In England the usual example is NICE, which recommends technologies for an NHS whose budget it does not set. The decision maker's standing in an evaluation comes from the decision-making approach to cost-benefit analysis, which treats decision makers as a legitimate source of values and weights alongside the preferences of the people affected. Health economists use it to justify a budget-specific perspective and to read the cost-effectiveness threshold as the price of a budget constraint.

The decision-making approach of Sugden and Williams

The approach began in cost-benefit analysis, not in health care. Culyer, in a chapter reprinted in The Humble Economist, traces to Williams in 1972 an explicit departure from welfarism, discussed further by Sugden and Williams in 1978 as the decision-making approach and contrasted with the Paretian approach. In the Paretian approach welfare depends only on the utilities individuals get from goods and services, while in the decision-making approach governments and other decision makers may have objectives other than making Pareto improvements.

Culyer adds that a decision maker may impose its own values on what individuals consume, as with merit goods, and may hold its own view of the right discount rate between periods. On this account the answer to the question of who decides which entities, with which weights, go into the social welfare function is the decision makers.

Brouwer, Culyer, van Exel and Rutten (2008) count this approach, in which decision makers and not individual sovereignty supply the values and weights of public decision making, among the roots of extra-welfarism. Claxton, Walker, Palmer and Sculpher (2010) describe it as giving economic analysis a legitimate role in explicitly considering the objectives and constraints of the decision maker. The decision maker is therefore part of the normative basis of an evaluation, not just its audience, and the welfare economics page sets out the welfarist baseline it departs from.

Who sets the values and who estimates the consequences

The approach separates two roles. Culyer argues that it is not for analysts to specify what the source of values or the perspective ought to be, and that their first task is to establish whose values are to count, inferred from the context and from the clients or commissioner of the analysis. Analysts may clarify the issues and spell out the consequences of each choice.

Brouwer and colleagues make the same point about valuation. Economists, they write, are not equipped to make value judgements about which outcomes count, though they can help those charged with making them and can elicit values from samples of relevant populations. Choosing which groups to sample is normally a matter for the ultimate decision maker whom the analyst advises.

HM Treasury's Green Book (2026) builds the same division into UK central government appraisal. It states that it does not set government objectives or make policy decisions and that it provides a framework for objective and impartial advice to decision makers, whose responsibility it is to balance the considerations of value for money in each case. Where welfare weights are used, practitioners must present weighted estimates alongside unweighted ones so that decision makers can see their effect.

NICE as the agent of a higher authority

A health system rarely has one decision maker holding a complete social welfare function. Claxton and colleagues argue that bodies such as NICE can be treated as agents of a socially legitimate higher authority that is unable to express an explicit and coherent social welfare function. Such an agent cannot be asked to improve social welfare, since social welfare cannot be specified. The higher authority allocates budgets and sets explicit objectives instead, which for NICE means improving health, and Claxton and colleagues locate that authority in the whole democratic process, not in a minister, the Treasury or the government alone.

The NICE manual (PMG36) reflects this position. Section 4.2.9 states that NICE does not set the budget for the NHS and that its evaluations aim at guidance representing an efficient use of available NHS and personal social services resources. Section 4.2.15 justifies cost-effectiveness analysis by NICE's focus on maximising health gains from a fixed NHS and personal social services budget.

The principal-agent problem page covers agency in general. Brouwer and colleagues note one difference from the textbook agent. Decision makers acting for the public may act as they think they ought to act, which need not match how their principals would act.

How the decision maker's remit shapes an evaluation

Much of a cost-effectiveness analysis follows from whose decision it informs. The perspective on costs, the outcome measure and the threshold each trace back to the remit and budget of the decision maker, so two analyses of one technology for different bodies can disagree without either being wrong.

Brouwer and colleagues suggest that the focus on the decision maker explains why health economic evaluations do not always take a societal perspective on costs and concentrate mainly on health for effects. Claxton and colleagues add that a budget-specific focus is entirely consistent with the decision-making approach, because many decision-making bodies answer for a budget. PMG36 sets the reference-case perspective on costs as the NHS and personal social services (section 4.2.7). Under section 4.2.10, benefits to other government bodies, such as less crime after treatment for drug misuse, are identified at scoping, agreed with the Department of Health and Social Care and presented separately from the reference case. Claxton and colleagues report that the US Panel on Cost-Effectiveness in Health and Medicine justified its societal perspective by the Rawlsian veil of ignorance, and that the decision-making approach appears to have played little role in its deliberations.

Outcomes follow the decision maker's objective too. Brouwer and colleagues describe the QALY as a way to answer questions raised by decision makers who have selected health maximisation as one of their policy objectives.

The threshold is where the budget enters. In the framework of Claxton and colleagues, a social decision maker such as NICE faces an exogenous budget, and the threshold reflects the reciprocal of the shadow price of the budget constraint. PMG36 (section 6.3.1) states that, given the fixed NHS budget, the appropriate maximum acceptable ICER is the opportunity cost of programmes displaced by new, more costly technologies, and section 6.3.7 refers to a range of GBP 25,000 to GBP 35,000 per QALY gained.

Legitimacy and the values a decision maker cannot simply assert

Placing values with the decision maker raises the matter of where its own authority comes from. Brouwer and colleagues accept that extra-welfarism may be inherently paternalistic, because weighting utilities and allowing changes the Pareto criterion would not sanction both need an authority, such as decision makers, the general public, a committee or a citizens' jury.

Rawlins and Culyer (2004) stated that NICE and its advisory bodies have no particular legitimacy to determine the social values of those served by the NHS, which is why NICE had formed a Citizens Council, and that where no other relevant information exists NICE will make its own social value judgements and be held accountable for them. NICE's current principles page says its principles replace the social and scientific value judgements first published in 2005, and PMG36 (section 6.1.7) says committees consider NICE's advice on social value judgements.

Procedure carries much of this weight. PMG36 (section 6.1.8) states that the credibility of NICE guidance depends on the transparency of the committee's decision-making process. The deliberative process page covers how committees combine evidence with judgement, and the decision making page covers the process as a whole.

Worked example with two budget holders and one programme

All figures in this example are illustrative. A treatment programme for drug misuse costs the NHS GBP 600,000 more than current care, gains 20 QALYs and saves the justice system GBP 300,000 through less crime, the kind of wider benefit PMG36 section 4.2.10 has in mind.

$$NHB = \Delta E - \frac{\Delta C_h}{k}$$

where $NHB$ is the net health benefit to the NHS in QALYs, $\Delta E$ is the QALY gain, $\Delta C_h$ is the additional NHS cost in GBP and $k$ is the cost-effectiveness threshold in GBP per QALY.

$$T = \Delta C_h - k \, \Delta E$$

where $T$ is the transfer in GBP that would leave the NHS with no net health loss.

1. The NHS decision maker at GBP 25,000 per QALY. The extra cost displaces 600,000 / 25,000 = 24 QALYs elsewhere, so the net health benefit is 20 minus 24, a loss of 4 QALYs. On its own budget and objective the NHS would not fund the programme.

2. The same decision maker at GBP 35,000 per QALY. The extra cost displaces 600,000 / 35,000 = 17.14 QALYs, so the net health benefit is 20 − 17.14 = 2.86 QALYs and the programme is worth funding.

3. A compensation test across the two budgets. At GBP 25,000 per QALY the transfer needed is 600,000 − 25,000 × 20 = 100,000, or GBP 100,000. The justice system saves GBP 300,000, so it could pay that sum and still be 300,000 − 100,000 = 200,000, or GBP 200,000, better off. This is the kind of test Claxton and colleagues propose for effects that spill into other sectors.

4. One decision maker holding both budgets. A body responsible for both would count a net cost of 600,000 − 300,000 = 300,000, or GBP 300,000, which at GBP 25,000 per QALY displaces 300,000 / 25,000 = 12 QALYs, for a net gain of 20 − 12 = 8 QALYs. That assumes a pound of justice spending is worth the same as a pound of NHS spending, a judgement about both budgets.

5. Interpretation. The evidence never changes. The NHS decision maker rejects the programme at the lower end of the range and accepts it at the upper end, while a transfer or a single holder of both budgets makes it acceptable. Which answer applies depends on who the decision maker is and what budget and objectives it has, which is why PMG36 asks for wider benefits to be shown separately from the reference case.

Decision maker, perspective, decision problem and stakeholder

Several neighbouring terms are easy to confuse with this one. The decision problem names the decision maker alongside the population, the options, the outcomes and the costs, and the perspective is the viewpoint that follows from the decision maker's remit. The decision is the choice itself, and decision making is the process that produces it.

Brouwer and colleagues treat many stakeholders as possible sources of values, a choice that may vary with the level of decision making and the jurisdiction. The decision maker is the party whose remit settles which of those values count. In clinical decision analysis the decision maker may be a clinician choosing with a patient, and a decision node in a decision tree marks where that choice is made. A surrogate decision-maker, who decides on behalf of a patient, belongs to clinical ethics.

Common misreadings of the decision maker's role

The decision maker's role is open to five misreadings.

1. The decision maker is only the client of the analysis. In the decision-making approach its objectives and constraints are part of the normative basis of the evaluation.
2. Any decision maker's values will do. Rawlins and Culyer stated that NICE has no particular legitimacy to determine social values by itself, and NICE now publishes the principles behind its social value judgements.
3. A narrow perspective is a technical shortcut. A budget-specific perspective follows from the decision maker's remit, and PMG36 ties the NHS and personal social services perspective to the fact that NICE does not set the NHS budget.
4. The threshold is the decision maker's willingness to pay. For Claxton and colleagues it reflects the reciprocal of the shadow price of the budget the decision maker faces. The Green Book value of GBP 70,000 per QALY in 2020-21 prices is a different quantity.
5. Economic evaluation makes the decision. PMG36 (section 6.3.1) states that cost effectiveness is necessary but not the only basis for decision making.

Sources

• Brouwer WBF, Culyer AJ, van Exel NJA, Rutten FFH. Welfarism vs. extra-welfarism. Journal of Health Economics. 2008;27(2):325-338. https://doi.org/10.1016/j.jhealeco.2007.07.003
• Claxton K, Walker S, Palmer S, Sculpher M. Appropriate Perspectives for Health Care Decisions. CHE Research Paper 54. York: Centre for Health Economics, University of York; 2010. https://www.york.ac.uk/media/che/documents/papers/researchpapers/rp54_appropriate_perspectives_for_health_care_decisions.pdf
• Cookson R, Claxton K, editors. The Humble Economist: Tony Culyer on Health, Health Care and Social Decision Making. York: University of York and Office of Health Economics; 2012. Chapters 7 and 17, by Culyer AJ. https://www.york.ac.uk/media/che/documents/books/The%20Humble%20Economist%20corrected%20PDF%20version.pdf
• HM Treasury. The Green Book (2026). Updated 28 October 2026. https://www.gov.uk/government/publications/the-green-book--2/the-green-book-2026
• National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance: the manual (PMG36). Published 31 January 2022, last updated 13 October 2026. Sections 4.2.7 to 4.2.15, 6.1.7, 6.1.8, 6.3.1 and 6.3.7. https://www.nice.org.uk/process/pmg36
• National Institute for Health and Care Excellence. Our principles. Accessed 1 November 2026. https://www.nice.org.uk/about-us/our-principles
• Rawlins MD, Culyer AJ. National Institute for Clinical Excellence and its value judgements. BMJ. 2004;329(7459):224-227. https://doi.org/10.1136/bmj.329.7459.224