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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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    3. 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.
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    5. 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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    12. 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.
    13. 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.
    14. Frijters, Paul & Johnston, David W. & Shields, Michael A., 2008. "Happiness Dynamics with Quarterly Life Event Data," IZA Discussion Papers 3604, Institute of Labor Economics (IZA).
    15. 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.
    16. 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.
    17. 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).
    18. 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.
    19. 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.
    20. 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.
    21. 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.
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    24. 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.

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