A compensating income variation approach to valuing 34 health conditions in Iceland

- Valuing health conditions is an important but difficult task.
- We use compensating income variation (CIV) to value several health conditions.
- Easily attained health-related quality of life (HRQoL) proxies are also considered.
- CIV for some mental-health conditions may be problematic.
- HRQoL proxies appear to yield higher values than found using other methods.

Using data from an Icelandic health-and-lifestyle survey carried out in 2007, 2009, and 2012, we employ a compensating income variation (CIV) approach to estimate the monetary value sufficient to compensate individuals for the presence of various sub-optimal health conditions. This method is inexpensive and easy on subjects and has been applied to several desiderata that do not have revealed market prices. The CIV literature is, however, still limited in its application to health and thus information about its suitability is limited. With the aim of shedding light on the method́s appropriateness we thus provide a broad-view analysis including a spectrum of diseases and conditions that can be held up against more traditionally used methods. CIV for physical conditions vary greatly, but paralysis, fibromyalgia, chronic back pain, rheumatoid arthritis, urinary incontinence, severe headache and thyroid disease were among those consistently associated with substantial well-being reductions. Mental-health results using this method should be read with caution. The societal value of health interventions is multidimensional, including for example increased productivity in the population. However, one of the main positive aspects of increased health is undoubtedly the increased well-being of the treated subjects. Such quality-of-life effects should thus preferably be taken into account. For this reason, information on the value individuals place on recovery from various sub-optimal health conditions is useful when it comes to prioritizing scarce capital in the health sector. It is therefore vital to estimate the importance individuals place on various health states and hold them up against each other. Furthermore, this paper has scientific value as it sheds light on attributes of a potentially useful method in health evaluations.