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Money for Health: The Compensating Variation of Cardiovascular Diseases

Author

Listed:
  • Groot, Wim

    () (Maastricht University)

  • Maassen van den Brink, Henriette

    () (University of Amsterdam)

  • Plug, Erik

    () (University of Amsterdam)

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 compensating 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 compensating variation of cardiovascular diseases. It is found that for a 25-year old male the compensating variation of a heart disease ranges from 160,000 Euro to 430,000 Euro depending on the welfare level. This is about 8,000 to 32,000 Euro for an additional life year, depending on the quality of life. The compensating variation declines with age and is lower for women than for men. The estimates further vary by the discount rate chosen. The estimates of the compensating variation are generally higher than the money spent on heart related medical interventions per QALY.

Suggested Citation

  • Groot, Wim & Maassen van den Brink, Henriette & Plug, Erik, 2002. "Money for Health: The Compensating Variation of Cardiovascular Diseases," IZA Discussion Papers 653, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp653
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    References listed on IDEAS

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    More about this item

    Keywords

    subjective income evaluation; cardiovascular disease; compensating income variations;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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