Marginal rates of substitution between discounted health-state years in a utility-theoretic model of preferences over latent health risks

Abstract

BACKGROUND. The time-tradeoff (TTO) method typically describes some period of years in an adverse health state and asks respondents how many (fewer) years in “full health” they would accept to avoid the longer time period in the adverse health state. TTO studies have produced many useful insights, such as the finding that tradeoffs willingly made depend upon the age and gender of the respondent. In contrast to surveys that focus specifically on time tradeoffs, we use a large general-population conjoint choice survey in the U.S. that was designed to permit estimation of willingness to pay (WTP) by different types of respondents to reduce their risks of suffering illnesses with specified time profiles of future symptoms and outcomes. These WTP functions were intended to serve as monetized benefits estimates for benefit-cost analysis of public policies to reduce both morbidity and mortality risks. OBJECTIVES. Our current analysis uses the same basic utility-theoretic choice model as for our WTP analyses, but focuses instead on the estimated marginal rate of substitution between discounted time in different pairs of health-states drawn from the set that includes pre-illness status quo health, sick time, recovered/remission time and lost life-years. METHODS. A representative U.S. sample aged 25+ completed a computerized conjoint-analysis (discrete-choice experiment) survey. Each choice task involved two different health risk reductions for specific health threats described in terms of their future age-at-onset, duration, prognosis, and reduction in life expectancy. The pattern of future adverse health state durations—sick-years, recovered-years, and lost life-years—was randomly assigned for each age and gender (subject to basic plausibility exclusions). Respondents were provided with extensive tutorial material before being asked to choose their most preferred risk reduction program, where each program was described as a pin-prick diagnostic test that would provide their physician with information that would permit medication or other measures to reduce the health risk in question—at a specified annual cost. Respondents could also choose the status quo. Our utility-theoretic model to explain risk-reduction program choices employs a flexible second-order translog-type approximation for its discounted expected utility-differences, and permits marginal utility parameters associated with different health states to vary systematically (in general, quadratically) with respondent age and other characteristics. RESULTS. Just as there is considerable heterogeneity across individuals and across health risks in WTP to reduce the risk of specific illness profiles, there is also considerable estimated heterogeneity in timetradeoffs. Our initial models imply some very interesting heterogeneity across respondents of different ages, and we also plan extensions to explore differences by type of illness. CONCLUSIONS. WTP estimates based on these data have been demonstrated to be consistent with the findings of wage-risk studies in the special case of sudden death in the current period, yet our model expands greatly the continuum of illness profiles for which monetized WTP amounts can be calculated. The current analysis permits us also to determine the extent to which respondent preferences elicited in our study imply time tradeoffs similar to those measured by more conventional TTO studies reported in the literature.

Publication
In progress, but suspended
value of health risk reductions private health risks survey