Valuing Nonfatal Health Risk Reductions in Global Benefit‐Cost Analysis

32 Pages Posted: 7 Feb 2022

See all articles by Lisa A. Robinson

Lisa A. Robinson

Harvard University, Center for Health Decision Science; Harvard University, Center for Risk Analysis

James K. Hammitt

Harvard University

Date Written: March 12, 2018

Abstract

In benefit-cost analysis, ideally the values placed on nonfatal risk reductions would reflect the preferences of those affected by a policy; i.e., individuals’ willingness to exchange their own income to achieve a reduction in their own risk. Presumably, this willingness to pay (WTP) accounts for both the pecuniary effects of the risk change (e.g., out-of-pocket medical expenses and earnings) and the non-pecuniary effects (e.g., pain and suffering and other quality of life impacts). However, for nonfatal risk reductions, relatively few WTP studies are available. Thus the main challenge faced by analysts often is to determine how to best value these risk changes in the absence of WTP estimates. Typically, two approaches are used either alone or in combination. The first involves applying an estimate of the costs that are averted when incidence is reduced, including medical costs and productivity losses. These costs may be borne by the individual, his or her family or household, and society at large. Because these costs do not address the value of averted pain and suffering or other quality of life impacts, monetized estimates of quality-adjusted life years (QALYs) or disability-adjusted life years (DALYs) are often added. We discuss the general framework for valuation and its practical implementation, developing recommendations for the application of these measures to value nonfatal risk reductions in low- and middle-income countries.

Keywords: willingness to pay, nonfatal risk reductions, value per QALY, value per DALY, cost of illness

JEL Classification: D61, H43, I15, I31

Suggested Citation

Robinson, Lisa A. and Hammitt, James K., Valuing Nonfatal Health Risk Reductions in Global Benefit‐Cost Analysis (March 12, 2018). Available at SSRN: https://ssrn.com/abstract=4013166 or http://dx.doi.org/10.2139/ssrn.4013166

Lisa A. Robinson (Contact Author)

Harvard University, Center for Health Decision Science ( email )

718 Huntington Avenue
Harvard T.H. Chan School of Public Health
Boston, MA 02115
United States

HOME PAGE: http://https://www.hsph.harvard.edu/lisa-robinson/

Harvard University, Center for Risk Analysis ( email )

Harvard T.H. Chan School of Public Health
718 Huntington Avenue
Boston, MA 02115
United States

HOME PAGE: http://https://www.hsph.harvard.edu/lisa-robinson/

James K. Hammitt

Harvard University ( email )

718 Huntington Avenue
Boston, MA 02115
United States
617-432-4343 (Phone)
617-432-0190 (Fax)

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