Properties of actuarially fair and pay-as-you-go health insurance schemes for the elderly. An OLG model approach.

The aged dependency ratio or ADR is growing at a fast pace in many countries. This fact causes stress to the economy and might create conflicts of interest between young and old. In this paper the properties of different health insurance systems for the elderly are analysed within an overlapping generations (OLG) model. The properties of actuarial health insurance and different variations of pay-as-you-go (PAYG) health insurance are compared. It turns out that the welfare properties of these contracts are heavily dependent on the economy's dynamic properties. Of particular importance is the magnitude of the rate of population growth relative to the interest rate. In addition, it is shown that public health insurance is associated with an inherent externality resulting in a second-best solution.

Altruism and the value of statistical life: empirical implications.

In this paper the empirical implications of altruism for cost-benefit analysis of projects involving health changes are investigated. It is shown that a willingness-to-pay question allowing the respondent to state her total willingness to pay (irrespective of what reasons she may have for paying), subject to everybody else paying so as to stay at their initial levels of utility, produces, as a special case, the project evaluation rules derived by Jones-Lee (1991, 1992) and others. The implications of alternative formulations of the valuation question in a contingent valuation study are also explored.

Is there a meaningful definition of the value of a statistical life?

A definition of the value of a statistical life is derived. This definition has a meaningful interpretation in terms of the monetary value of expected present value utility if consumption is age-independent. In all other cases, empirical estimates of the value of a statistical life are biased estimators of the monetary counterpart to expected present value utility.

Wealth from optimal health.

Recently, much research has been devoted to the question of how the conventional net national product measure should be augmented so as to cover changes in the stocks of natural resources. This paper investigates the treatment of health (capital) and the risk of 'doomsday' caused by pollution in such welfare measures. Our problem is not a standard optimal control problem because the survival probability depends on state variables. We show how to handle this complication. The resulting welfare measure is contrasted with the conventional net national product measure. Finally, we address the matter of how to design a subsidy on health investment such that a market economy provides the optimal level of health.

Time spent on waiting lists for medical care: an insurance approach.

In this paper, we develop a simple model of the benefits and costs of being on a waiting list. The model shows that complex factors are in operation, implying that a shorter waiting time need not necessarily be preferred to a longer waiting time. We also present an empirical study, where a sample of Swedes are offered the possibility of purchasing private insurance, thus reducing waiting time for surgery beyond the three-month guarantee offered by the public sector health care system. Respondents could choose between two insurance contracts. A 'spike' model, where the probability of a zero WTP is strictly positive, was developed and estimated to obtain demand functions for private insurance.

Willingness to pay for antihypertensive therapy--further results.

A measurement experiment regarding willingness to pay for antihypertensive therapy is reported. A new type of binary willingness to pay question is used, that allows for different degrees of certainty with respect to the responses. Mean willingness to pay is derived from a simple expected utility model and estimated using maximum likelihood methods. The estimated parameters are highly significant, with predicted signs, and imply a mean willingness to pay of about SEK 800 ($130) per month. The explanatory power of the equation that only includes 'certain' yes/no responses is, as expected, much higher than that of the equation where only 'uncertain' responses are included.

Economic evaluation of drug therapy: a review of the contingent valuation method.

The aim of this paper is to review the use of the contingent valuation (CV) method in economic evaluation of drug therapy. With the CV method, willingness to pay for a project 'treatment' is measured with survey methods, which makes it possible to carry out traditional cost-benefit analysis. The CV method has been developed in environmental economics and is now the most commonly used method of measuring environmental benefits. Due to the limitations of existing methods, empirical applications are starting to appear in the health field as well. From the empirical applications with respect to drug treatment it is evident that it is possible to achieve acceptable response rates. The methodological problems encountered when measuring willingness to pay with survey methods are similar to the problems encountered when measuring utility and quality of life in cost-utility analysis. It is concluded that further studies with the CV method are necessary to further explore questions concerning the reliability and validity of the method in this field.

The economics of ageing: on the attitude of Swedish people to the distribution of health care resources between the young and the old.

The Swedish Priorities Investigation [1] proposes that no account should be taken of a patient's age when allocating health care resources. Measures to save an old person's life are to be given the same priority as measures to save a young person's life. In the present study it is shown that the attitude of the Swedish population to this age-related problem is dramatically different from that laid down in the priorities investigation. On average, people are willing to sacrifice thirty-five 70-year-olds to save one 30-year-old. It is also shown that a measure which increases life-expectancy by 1 year, conditional on having survived until the age of 75 years, is given a low weighting. The (maximum) insurance premium the average Swede is willing to pay for such a programme is about 700 pounds.

A note on prevention versus cure.

The aim of this study is to test if the general Swedish population prefers saving lives through prevention or acute care. A trade-off question of a choice between saving lives through prevention or acute care was administered in a Swedish population sample. Based on the answers we estimate the median number of lives saved in acute care that is judged equivalent to saving one life through prevention. According to the results 1.2-1.4 lives saved in acute care is judged equivalent to saving one life through prevention. Thus our results indicate that lives saved through prevention and cure are given about the same value by the median respondent. Individuals seem to focus on the size of the health benefits rather than whether the health benefits are achieved through prevention or cure.

Value for money? A contingent valuation study of the optimal size of the Swedish health care budget.

The contingent valuation method has been developed in the environmental field to measure the willingness to pay for environmental changes using survey methods. In this exploratory study the contingent valuation method was used to analyse how much individuals are willing to spend in total in the form of taxes for health care in Sweden, i.e. to analyse the optimal size of the 'health care budget' in Sweden. A binary contingent valuation question was included in a telephone survey of a random sample of 1260 households in Sweden. With a conservative interpretation of the data the result shows that 50% of the respondents would accept an increased tax payment to health care of about SEK 60 per month ($1 = SEK 8). It is concluded that the results indicate that the population overall thinks that the current spending on health care in Sweden is on a reasonable level. There seems to be a willingness to increase the tax payments somewhat, but major increases does not seem acceptable to a majority of the population.

Microeconomic surplus in health care: applied economic theory in health care in four European countries.

INTRODUCTION: In economic theory economic surplus refers to two related quantities: Consumer and producer surplus. Applying this theory to health care "convenience" could be one way how consumer benefits might manifest itself. METHODS: Various areas of economic surplus were identified and subsequently screened and analyzed in Germany, Spain, The Netherlands, and the UK: Cesarean births, emergency room visits (nights or weekends), drug availability after test results, and response surplus. A targeted literature search was being conducted to identify the associated costs. Finally the economic surplus (convenience value) was calculated. RESULTS: The economic surplus for different health care areas was being calculated. The highest economic surplus was obtained for the example of response surplus IVF-treatments in The Netherlands. CONCLUSION: The analyzed examples in this article support the underlying hypothesis for this research: "Value of convenience defined as the consumer surplus in health care can be shown in different health care settings." Again, this hypothesis should be accepted as a starting point in this research area and hence further primary research is strongly recommended in order to fully proof this concept.

Saving lives in the present versus saving lives in the future--is there a framing effect?

This study considers how to compare programs which are designed to save lives. "To estimate the discount rate for lives saved in the future a number of studies have been carried out on the trade-off between saving lives now and in the future. A telephone survey is administered to about 1,700 individuals [in Sweden] to test if the framing of the question affects the estimated trade-off. In one sample the question is framed as saving 100 lives today versus saving x future lives and in one sample the question is framed as saving 100 future lives versus saving y lives today. The result shows that the framing has a major impact on the trade-off."

The discounting of lives saved in future generations--some empirical results.

The aim of this note is to estimate the discount rates that individuals in the present generation in Sweden use to discount lives saved in future generations at different points in time. A binary survey question, where individuals choose between saving lives in their own generation versus saving lives in future generations, was administered in a general population sample of 850 individuals. Three time horizons of 20, 50 and 100 years were used in three different subsamples. Logistic regression analysis was used to estimate the discount rate. The estimated annual discount rate is 25% for the 20 year time horizon, 12% for the 50 year time horizon and 8% for the 100 year time horizon.