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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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    3. 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," NBER Working Papers 21098, National Bureau of Economic Research, Inc.
    4. 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.
    5. 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.
    6. 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.
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    9. 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.
    10. 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.
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    12. 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.
    13. 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.
    14. 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.
    15. 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.
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    17. 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.
    18. 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.
    19. 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.
    20. 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.
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    23. 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).
    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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