Money for Health: The Compensating Variation of Cardiovascular Diseases
University of Maastricht; University of Amsterdam
Henriette Maassen van den Brink
University of Amsterdam
University of Amsterdam - Amsterdam School of Economics (ASE); Tinbergen Institute; Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 653
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.
Number of Pages in PDF File: 24
Keywords: Compensating Income Variations, Cardiovascular Disease, Subjective Income Evaluation
JEL Classification: I10, I12
Date posted: January 31, 2003
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