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Priority setting in health care and higher order degree change in risk

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  • Courbage, Christophe
  • Rey, Béatrice
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    Abstract

    This paper examines how priority setting in health care expenditures is influenced by the presence of uncertainty about the severity of the illness and the effectiveness of medical treatment. We provide necessary and sufficient conditions on social preferences under which a social planner will allocate more health care resources to populations at higher risk. Changes in risk are defined by the concept of stochastic dominance up to order n. The shape of the social utility function and an equity weighting function are used to model the inequality aversion of the social planner. We show that for higher order risk changes, the usual conditions on preferences such as prudence or relative risk aversion are not necessarily required to prioritise health care when there are different levels of uncertainty associated with otherwise similar patient groups.

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    File URL: http://www.sciencedirect.com/science/article/pii/S016762961200032X
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 31 (2012)
    Issue (Month): 3 ()
    Pages: 484-489

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    Handle: RePEc:eee:jhecon:v:31:y:2012:i:3:p:484-489

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    Web page: http://www.elsevier.com/locate/inca/505560

    Related research

    Keywords: Priority setting; Stochastic dominance; Health care; Inequality aversion;

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    References

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    1. Wagstaff, Adam, 1991. "QALYs and the equity-efficiency trade-off," Journal of Health Economics, Elsevier, vol. 10(1), pages 21-41, May.
    2. Edwards, Ryan D, 2008. "Health Risk and Portfolio Choice," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 472-485.
    3. EECKHOUDT, Louis & ETNER, Johanna & SCHROYEN, Fred, . "The values of relative risk aversion and prudence: A context-free interpretation," CORE Discussion Papers RP -2162, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    5. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
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    22. repec:cor:louvrp:2431 is not listed on IDEAS
    23. Dolan, Paul, 1998. "The measurement of individual utility and social welfare," Journal of Health Economics, Elsevier, vol. 17(1), pages 39-52, January.
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    Cited by:
    1. BERGER, Loïc & BLEICHRODT, Han & EECKHOUDT, Louis, . "Treatment decisions under ambiguity," CORE Discussion Papers RP -2494, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Elyès Jouini & Clotilde Napp & Diego Nocetti, 2013. "Economic consequences of Nth-degree risk increases and Nth-degree risk attitudes," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 199-224, October.

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