Money for health: The compensating variation of cardiovascular diseases

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-topay 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 e160,000 to e430,000 depending on the welfare level. This is about e8,000 to e32,000 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 spend on heart related medical interventions per QALY.