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How important is severity for the evaluation of health services: new evidence using the relative social willingness to pay instrument

Jeff Richardson (), Angelo Iezzi and Aimee Maxwell
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Jeff Richardson: Monash University
Angelo Iezzi: Monash University
Aimee Maxwell: Monash University

The European Journal of Health Economics, 2017, vol. 18, issue 6, No 2, 683 pages

Abstract: Abstract The ‘severity hypothesis’ is that a health service which increases a patient’s utility by a fixed amount will be valued more highly when the initial health state is more severe. Supporting studies have employed a limited range of analytical techniques and the objective of the present paper is to test the hypothesis using a new methodology, the Relative Social Willingness to Pay. Three subsidiary hypotheses are: (1) that the importance of the ‘severity effect’ varies with the type of medical problem; (2) that the relationship between value and utility varies with the severity of the initial health state; and (3) that there is a threshold beyond which severity effects are insignificant. For each of seven different health problems respondents to a web-based survey were asked to allocate a budget to five services which would, cumulatively, move a person from near death to full health. The time trade-off utilities of health states before and after the service were estimated. The social valuation of the service measured by the budget allocation was regressed upon the corresponding increase in utility and severity as measured by the pre-service health state utility. Results confirm the severity hypothesis and support the subsidiary hypotheses. However, the effects identified are quantitatively significant only for the most severe health states. This implies a relatively limited redistribution of resources from those with less severe to those with more severe health problems.

Keywords: CEA; Severity; Social preferences; Social value (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s10198-016-0817-y

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