Concept Architecture
Concept
Theoretically, Health State Valuation is the process of assigning preference-based values to defined health states to quantify their relative desirability. It is founded on utility theory and welfare economics and provides the basis for converting descriptive health states into cardinal utility values suitable for economic evaluation. Health state valuation exists to reflect societal or individual preferences for different levels of health and to enable comparisons of health outcomes across interventions.
Mathematically, Health State Valuation is represented through preference elicitation models that estimate utility values for health states. Utilities are derived using recognised valuation techniques, including Time Trade-Off (TTO), Standard Gamble (SG) and Discrete Choice Experiments (DCE), and are subsequently modelled to generate value sets or scoring algorithms for preference-based instruments. These utility values are generally anchored at 1 for full health and 0 for death, with negative values permitted for health states considered worse than death.
In practice, Health State Valuation is undertaken by administering structured valuation exercises to representative population samples or patients. Responses are analysed using econometric models to estimate value sets for instruments such as the EQ-5D, SF-6D and HUI. The resulting utility values are applied in cost-utility analyses, decision-analytic models and health technology assessments to estimate quality-adjusted life years (QALYs).
Purpose
Used to derive preference-based utility values for health states, develop value sets for health-related quality of life instruments, estimate QALYs and support cost-utility analysis and health technology assessment.
Mathematical Formulae
Primary Formula
There is no universally recognised canonical mathematical formula.
Health state values are estimated using validated preference elicitation models rather than a single canonical equation.
Supporting Formulae
Time Trade-Off
U(H) = t?T
where:
- U(H) = utility of health state H
- t = years in full health considered equivalent
- T = years in the health state being valued
Standard Gamble
U(H) = p
where:
- p = probability of full health at the point of indifference
Quality-adjusted life years:
QALY = ????� U? ? t?
Related Mathematical Methods
- Time Trade-Off
- Standard Gamble
- Discrete Choice Experiment
- Conditional logit modelling
- Mixed logit modelling
- Utility estimation
- Multi-attribute utility theory
Example
A respondent values an EQ-5D health state using the Time Trade-Off method and is indifferent between living 8 years in full health and 10 years in the described health state.
The utility value is:
U = 8?10 = 0.80
If this health state persists for five years:
QALY = 0.80 ? 5 = 4.0
The valued health state therefore contributes 4.0 QALYs over the five-year period.
Excel Implementation
| Function | Example Formula | Health Economics Application |
|---|---|---|
/ | =B2/C2 | Calculates utility using the Time Trade-Off method. |
| SUMPRODUCT | =SUMPRODUCT(UtilityRange,TimeRange) | Calculates QALYs from valued health states. |
| AVERAGE | =AVERAGE(B2:B101) | Calculates the mean utility across respondents. |
| STDEV.S | =STDEV.S(B2:B101) | Measures variation in health state valuations. |
VBA (Optional)
Automate the processing of health state valuation survey data, calculate utility values and generate value-set summary statistics for economic evaluation.
Sources
- Torrance GW. Measurement of Health State Utilities for Economic Appraisal. Journal of Health Economics. 1986.
- Devlin NJ, Shah KK, Feng Y, Mulhern B, van Hout B. Valuing Health-Related Quality of Life: An EQ-5D-5L Value Set for England. Health Economics. 2018.
- Drummond MF, Sculpher MJ, Claxton K, Stoddart GL, Torrance GW. Methods for the Economic Evaluation of Health Care Programmes. Oxford University Press.
- Gold MR, Siegel JE, Russell LB, Weinstein MC (Eds.). Cost-Effectiveness in Health and Medicine. Oxford University Press.
- NICE. Health Technology Evaluation Manual.
Related Concepts (2)
Library
Publications
1
NICE DSU Technical Support Document 8: An Introduction to the Measurement and Valuation of Health for NICE Submissions — Brazier, Rowen, TSD 8 ed., 2011 (NICE Decision Support Unit (University of Sheffield))
An introduction to the measurement and valuation of health for NICE submissions — the QALY, health-state utility values, generic preference-based measures, and the requirements of the NICE reference case.
Frequently Asked Questions (6)
What is health state valuation?
The process of assigning a preference-based utility value to a described health state, typically using a choice-based or rating-based method.
Source: Torrance GW. Measurement of health state utilities for economic appraisal. Journal of Health Economics. 1986;5(1):1-30. doi:10.1016/0167-6296(86)90020-2.
Why are health states valued on a scale anchored at death?
Health state values are placed on a scale where full health scores one and death scores zero so that the numbers can be combined with survival to form quality-adjusted life years. Anchoring at death is what allows a year in a given state to be compared with a shorter time in full health, and it makes states judged worse than death representable as values below zero. Without a death anchor, the scores could not be multiplied by years of life. Brazier and colleagues (2007) explain the need for this anchoring.
Source: Brazier et al. 2007
What methods are used for health state valuation?
Valuation uses direct methods, in which respondents value states through tasks such as the standard gamble, time trade-off, or rating scale, and indirect methods, in which a value set derived from a prior valuation study assigns values to states described by an instrument. Choice-based direct methods, involving risk or the sacrifice of time, are often preferred as utilities, while rating methods are simpler. Discrete choice experiments are increasingly used to derive value sets.
Source: Torrance 1986
Whose values are used in health state valuation?
Values may be elicited from the general public, imagining the states, or from patients experiencing them, and the two often differ, with the public tending to value some states lower than patients who have adapted. Many decision-making bodies specify values from a representative sample of the general public, on the grounds that resources are collectively funded, though the choice is debated. The source of values is stated, since it affects the utilities obtained.
Source: Torrance 1986
Why does health state valuation matter?
Health state valuation matters because the utilities it produces weight length of life in quality-adjusted life years, so they directly determine the outcome measure in cost-utility analysis and hence the results of economic evaluation. A different valuation of a state changes the quality-adjusted life years estimated and can alter which intervention appears cost-effective. The values therefore carry significant weight in decisions, which is why the method and source are scrutinised.
Source: Torrance 1986
What are the challenges of health state valuation?
Valuation is challenging because different methods, such as the standard gamble and time trade-off, give different values for the same state, and each embeds factors beyond preference, such as attitudes to risk or time. Public and patient values differ, raising the question of whose should count. Describing states adequately for valuation is difficult, and respondents may find the tasks demanding. These difficulties mean valuation rests on contested choices that are made explicit.
Source: Torrance 1986
Trust Record
Verified by Dr Darrin Baines
British health economist
Professional identity: darrinbaines.org
Verification date: 29 Aug 2025
Content version: 1.0.0
Canonical Identity
- Term code
- HE-EE-HU-033
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