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The Choice of Health Policies with Heterogeneous Populations


  • Richard J. Zeckhauser
  • Donald S. Shepard


Deciding whether to fund a given health program involves both statistical and ethical issues. Traditional statistical methods of measuring program effectiveness may give misleading results unless careful attention is paid to the question of population heterogeneity. Even within particular age and sex categories, members of a population typically differ in both their mortality rate and the extent to which they would benefit from a given medical intervention. It may or may not be possible to identify the risk factors (e. g., weight, smoking behavior) that explain these differences. If an intervention confers unequal benefit on different risk groups, it will change their mixture within the population over time. If those helped most are those at greatest risk, a "traditional assessment" will overstate intervention benefits. Greater accuracy can be achieved through a "standardized assessment, " which calculates intervention benefits separately for each distinctive risk group of the population. For example, a traditional assessment of pneumococcal pneumonia vaccine probably overstates program benefits and underestimates costs. Failure to recognize population heterogeneity also creates pitfalls in interpreting the results of clinical trials of new drugs, as illustrated by the example of sulfinpyrazone. As more sophisticated statistical methods improve our understanding of differential program benefits, they will also raise ethical problems. Use of a standardized assessment, for instance, may make it clear that it is cost-effective to give an intervention to certain groups (e.g., nonsmokers, the elderly) but not others. Considering this problem from an "original position" may reveal an ethically acceptable basis for making such decisions on the basis of efficiency. We believe that if people were unaware of which risk group they themselves would fall into, they would elect to allocate resources according to the principle of cost-effectiveness.

Suggested Citation

  • Richard J. Zeckhauser & Donald S. Shepard, 1980. "The Choice of Health Policies with Heterogeneous Populations," NBER Working Papers 0612, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0612 Note: HE

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    References listed on IDEAS

    1. Alan J. Auerbach & Harvey S. Rosen, 1980. "Will the Real Excess Burden Please Stand Up? (Or, Seven Measures in Search of a Concept)," NBER Working Papers 0495, National Bureau of Economic Research, Inc.
    2. Michael J. Boskin & Eytan Sheshinski, 1976. "Optimal Income Redistribution When Individual Welfare Depends Upon Relative Income," NBER Working Papers 0144, National Bureau of Economic Research, Inc.
    3. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    4. Ray C. Fair, 1971. "The Optimal Distribution of Income," The Quarterly Journal of Economics, Oxford University Press, vol. 85(4), pages 551-579.
    5. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    6. Kay, J. A., 1980. "The deadweight loss from a tax system," Journal of Public Economics, Elsevier, vol. 13(1), pages 111-119, February.
    7. R. E. Hall, 1970. "Wages, Income and Hours of Work in the U. S. Labor Force," Working papers 62, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Diamond, P. A. & McFadden, D. L., 1974. "Some uses of the expenditure function in public finance," Journal of Public Economics, Elsevier, vol. 3(1), pages 3-21, February.
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    Cited by:

    1. John Mullahy, 2001. "Live long, live well: quantifying the health of heterogeneous populations," Health Economics, John Wiley & Sons, Ltd., vol. 10(5), pages 429-440.
    2. Bishai, D. & Sindelar, J. & Ricketts, E.P. & Huettner, S. & Cornelius, L. & Lloyd, J.J. & Havens, J.R. & Latkin, C.A. & Strathdee, S.A., 2008. "Willingness to pay for drug rehabilitation: Implications for cost recovery," Journal of Health Economics, Elsevier, vol. 27(4), pages 959-972, July.

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