Bryan Caplan  

Value of Self-Rated Health Bleg

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Economics must be harder than ... Optometry Challenge...
Social scientists and medical researchers often ask people to rate their own health.  The General Social Survey, for example, asks respondents to place themselves on a four-step scale:
Would you say your own health, in general, is excellent, good, fair, or poor?
Question: Do you know of any researchers who try to place a dollar value on self-rated health?  I'm well aware of research on the dollar value of (a) a year of life, and (b) quality-adjusted life years.  What I'm looking for is research that specifically puts a dollar value on a step of self-rated health.

I'm tempted to just ballpark it at 10% of annual full-time income per step on a four-point scale, but if anyone's proposed anything more sophisticated, I want to know about it.

Thanks in advance.


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COMMENTS (5 to date)
Chris writes:

I don't know any specific literature, but 10% of annual income seems low. I've seen QALY value estimates ranging from $50 thousand to several hundred thousand.

In your estimate, going from "excellent health" to "poor health" would be 3 steps, so 30% of annual income.

For someone making 50k and a QUALY value of 50k, that implies a QALY score of 1.0 for perfect health and a QALY score of 0.7 for poor health. That seems like too small of a step.

Of course, perhaps you're taking issue with the entire QALY approach and would argue that the above estimates are meaningless.

Scotsman writes:

"excellent, good, fair, or poor" seems like a very limited range towards the worse end. If I had bad back pain or a generally fairly beat-up body at the age of 50, I would check "poor" - well, it's not "fair" - and 40% of annual income might seem reasonable. If I'm quadriplegic or have advanced leukaemia I'd still have to check poor, but the option and the monetary value hardly seem to cover it.

The other problem with the GSS question is that it doesn't cover how long you think you will remain a that level. If you have two broken legs, your health is poor but will probably get better. If you know you've got a devastating hereditary illness likely to kick in over the next five years, your health could be excellent.

All in all, if I was proposing a more sophisticated way to give a value to those ratings, I'd probably look at how they correlate with QALYs.

Mark Bahner writes:

Per Scotsman's comments above, how about: "How would you rate your health compared to people of your age and sex?"

Top decile to bottom decile.

Kevin writes:

I don't know about any study that does that, but there are plenty that link things like self-reported health to mortality or morbidity (link). In that study, going from the bottom two categories (Fair/Poor health) to the top category (Very Good health) decreased the 10-year mortality rate from 3.5 per 100 to 1.2 per 100.

So, if we give a value of, say, $50,000 to a life-year ($500,000 over a ten-year period), then going from Fair/Poor to Very Good would be worth ~11,500 (or ~1,150 per year) just on its effects on mortality alone. I'm sure you could find another study that either gives rates for disability and mortality (or just disability in isolation of mortality) to fill in the rest of the math.

Hendrik writes:

Interesting question. I don't know of any published study, so I did a very quick and dirty calculation using the German SOEP 2011 wave.

I estimated a well-being regression

lifesat=f(srh,inc,age,sex)

where
lifesat=overall life satisfaction on 0-to-10-scale
srh=self-rated health on five-point scale
inc=per capita household income in 10,000 Euro
age and sex entered in dummies.

Coefficient for srh: -0.888
Coefficient for inc: +0.133

which implies a value of 66,767 Euro per point on the srh scale, which is about four times the average - so a lot bigger than your guess.

Of course one issue is that money has a surprisingly small effect on life satisfaction.

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