Money for Health: The Compensating Variation of Cardiovascular Diseases

Wim Groot (), Henriette Maassen van den Brink () and Erik Plug ()
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Wim Groot: Maastricht University
Henriette Maassen van den Brink: University of Amsterdam

No 653, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: subjective income evaluation; cardiovascular disease; compensating income variations (search for similar items in EconPapers)
JEL-codes: I10 I12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2002-11
New Economics Papers: this item is included in nep-hea
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Published - published a 'Money for health: the equivalent variation of cardiovascular diseases' in: Health Economics, 2004, 13 (9), 859-872

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