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Money for health: the equivalent variation of cardiovascular diseases

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  • Wim Groot

    (Department of Economics, University of Amsterdam, The Netherlands)

  • Henriëtte Maassen van den Brink

    (Department of Economics, University of Amsterdam, The Netherlands)

  • Erik Plug

    (Department of Economics, University of Amsterdam, The Netherlands)

Abstract

This paper introduces a new method to calculate the extent to which individuals are willing to trade money for improvements in their health status. An individual welfare function of income (WFI) is applied to calculate the equivalent income variation of health impairments. We believe that this approach avoids various drawbacks of alternative willingness-to-pay methods. The WFI is used to calculate the equivalent variation of cardiovascular diseases. It is found that for a 25 year old male the equivalent variation of a heart disease ranges from €114 000 to €380 000 depending on the welfare level. This is about €10 000 - €30 000 for an additional life year. The equivalent variation declines with age and is about the same for men and women. The estimates further vary by discount rate chosen. The estimates of the equivalent variation are generally higher than the money spent on most heart-related medical interventions per QALY. The cost-benefit analysis shows that for most interventions the value of the health benefits exceeds the costs. Heart transplants seem to be too costly and only beneficial if patients are young. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Wim Groot & Henriëtte Maassen van den Brink & Erik Plug, 2004. "Money for health: the equivalent variation of cardiovascular diseases," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 859-872.
  • Handle: RePEc:wly:hlthec:v:13:y:2004:i:9:p:859-872
    DOI: 10.1002/hec.867
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    File URL: http://hdl.handle.net/10.1002/hec.867
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    Cited by:

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    2. Chowdhury, Shyamal & Krause, Annabelle & Zimmermann, Klaus F, 2015. "Arsenic Contamination of Drinking Water and Mental Health," CEPR Discussion Papers 10978, C.E.P.R. Discussion Papers.
    3. Nils Braakmann, 2009. "Other-regarding preferences, spousal disability and happiness: Evidence from German couples," Working Paper Series in Economics 130, University of Lüneburg, Institute of Economics.
    4. Olivier Chanel & Laura Perez & Nino Künzli & Sylvia Medina, 2016. "The hidden economic burden of air pollution-related morbidity: evidence from the Aphekom project," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(9), pages 1101-1115, December.
    5. Sven Fuchs & Magdalena Thöni & Maria McAlpin & Urs Gruber & Michael Bründl, 2007. "Avalanche Hazard Mitigation Strategies Assessed by Cost Effectiveness Analyses and Cost Benefit Analyses—evidence from Davos, Switzerland," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 41(1), pages 113-129, April.
    6. Sebastian Galiani & Paul J. Gertler & Raimundo Undurraga, 2015. "The Half-Life of Happiness: Hedonic Adaptation in the Subjective Well-Being of Poor Slum Dwellers to a Large Improvement in Housing," CEDLAS, Working Papers 0184, CEDLAS, Universidad Nacional de La Plata.
    7. Andrew J. Oswald & Nattavudh Powdthavee, 2008. "Death, Happiness, and the Calculation of Compensatory Damages," The Journal of Legal Studies, University of Chicago Press, vol. 37(S2), pages 217-251, June.
    8. Powdthavee, Nattavudh, 2009. "Ill-health as a household norm: Evidence from other people's health problems," Social Science & Medicine, Elsevier, vol. 68(2), pages 251-259, January.
    9. Pavlova, Milena & Hendrix, Marijke & Nouwens, Elvira & Nijhuis, Jan & van Merode, Godefridus, 2009. "The choice of obstetric care by low-risk pregnant women in the Netherlands: Implications for policy and management," Health Policy, Elsevier, vol. 93(1), pages 27-34, November.
    10. H. Eme Ichoku & William Fonta & Michael Thiede, 2011. "Socioeconomic gradients in self-rated health: a developing country case study of Enugu State, Nigeria," Economic Change and Restructuring, Springer, vol. 44(3), pages 179-202, August.
    11. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
    12. FLEURBAEY, Marc & SCHOKKAERT, Erik, 2011. "Equity in health and health care," CORE Discussion Papers 2011026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    13. Nils Braakmann, 2014. "The consequences of own and spousal disability on labor market outcomes and subjective well-being: evidence from Germany," Review of Economics of the Household, Springer, vol. 12(4), pages 717-736, December.
    14. Howley, Peter, 2017. "Less money or better health? Evaluating individual’s willingness to make trade-offs using life satisfaction data," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 53-65.
    15. Ricardo Pagán-Rodríguez, 2010. "Onset of disability and life satisfaction: evidence from the German Socio-Economic Panel," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(5), pages 471-485, October.
    16. Howley, P., 2016. "Valuing the benefits from health care interventions using life satisfaction data," Health, Econometrics and Data Group (HEDG) Working Papers 16/01, HEDG, c/o Department of Economics, University of York.
    17. Danyliv, Andriy & Groot, Wim & Gryga, Irena & Pavlova, Milena, 2014. "Willingness and ability to pay for physician services in six Central and Eastern European countries," Health Policy, Elsevier, vol. 117(1), pages 72-82.
    18. Ricardo Pagán-Rodríguez, 2012. "Longitudinal Analysis of the Domains of Satisfaction Before and After Disability: Evidence from the German Socio-Economic Panel," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 108(3), pages 365-385, September.
    19. Kapteyn, Arie & Kleinjans, Kristin J. & van Soest, Arthur, 2009. "Intertemporal consumption with directly measured welfare functions and subjective expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 425-437, October.
    20. Powdthavee, Nattavudh & van den Berg, Bernard, 2011. "Putting different price tags on the same health condition: Re-evaluating the well-being valuation approach," Journal of Health Economics, Elsevier, vol. 30(5), pages 1032-1043.
    21. Ada Ferrer-i-Carbonell, 2013. "Happiness economics," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 35-60, March.
    22. Frijters, Paul & Johnston, David W. & Shields, Michael A., 2008. "Happiness Dynamics with Quarterly Life Event Data," IZA Discussion Papers 3604, Institute for the Study of Labor (IZA).
    23. Shou-Lin Yang & Chiung-Ying Lee, 2015. "Analysis of the medical demands of elderly dementia patients considering the caregiver cost of medical accompaniment: an application of the travel cost method and altruistic utility function," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 423-439, January.
    24. Wim Groot & Henriëtte Maassen van den Brink, 2006. "The compensating income variation of cardiovascular disease," Health Economics, John Wiley & Sons, Ltd., vol. 15(10), pages 1143-1148.

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