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Money for health: the equivalent variation of cardiovascular diseases

Author Info

Listed author(s):
  • 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.

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File URL: http://hdl.handle.net/10.1002/hec.867
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 13 (2004)
Issue (Month): 9 ()
Pages: 859-872

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Handle: RePEc:wly:hlthec:v:13:y:2004:i:9:p:859-872
DOI: 10.1002/hec.867
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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  1. Buyze, Jeannine, 1982. "The estimation of welfare levels of a cardinal utility function," European Economic Review, Elsevier, vol. 17(3), pages 325-332.
  2. Hagenaars, Aldi J M & van Praag, Bernard M S, 1985. "A Synthesis of Poverty Line Definitions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(2), pages 139-154, June.
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  7. van Hout, Ben & Bonsel, Gouke & Habbema, Dik & van der Maas, Paul & de Charro, Frank, 1993. "Heart transplantation in the Netherlands; costs, effects and scenarios," Journal of Health Economics, Elsevier, vol. 12(1), pages 73-93, April.
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  9. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
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  11. Dolan, Paul, 2000. "The measurement of health-related quality of life for use in resource allocation decisions in health care," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 32, pages 1723-1760 Elsevier.
  12. Van Praag, Bernard M. S., 1988. "Climate equivalence scales : An application of a general method," European Economic Review, Elsevier, vol. 32(4), pages 1019-1024, April.
  13. van Praag, Bernard & Goedhart, Theo & Kapteyn, Arie, 1980. "The Poverty Line-A Pilot Survey in Europe," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 461-465, August.
  14. van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 69-89, October.
  15. Plug, Erik J. S. & Van Praag, Bernard M. S., 1998. "Similarity in response behavior between household members: An application to income evaluation," Journal of Economic Psychology, Elsevier, vol. 19(4), pages 497-513, August.
  16. Alan Diener & Bernie O'Brien & Amiram Gafni, 1998. "Health care contingent valuation studies: a review and classification of the literature," Health Economics, John Wiley & Sons, Ltd., vol. 7(4), pages 313-326.
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