How Uncertainty Matters Under Risk Neutrality.

It is typical in cost-effectiveness analysis to invoke a normative decision-making framework that assumes, as a starting point, that "a quality-adjusted life-year (QALY) is a QALY is a QALY." The implication of this assumption is that the decision maker is risk neutral and that expected values could be considered sufficiently informative for a given "approve or reject" decision. Nevertheless, it seems intuitive that less uncertainty should be desirable and this has led some to incorporate "real" risk aversion (RA) into cost-effectiveness analysis. We illustrate in this article that RA is not always necessary to justify choosing more over less certain options. We show that for a risk neutral decision maker, greater uncertainty can make the approval of technology less likely in the presence of (1) model nonlinearities, (2) nonlinear opportunity costs, and (3) irreversible costs. We call these cases of "apparent" RA. Incorporating explicit risk preferences into decision making can be challenging; nevertheless, as we show here, it is not necessary to justify caring about uncertainty in approval decisions.