In this paper, we discuss the use of cost-benefit analysis (CBA) for evalua
ting new healthcare interventions, present the theoretical basis for the us
e of willingness to pay as a method for valuing benefits in a CBA and descr
ibe how to obtain willingness-to-pay (WTP) measures of health benefits and
how to use these values in a CBA.
We review selected economic studies on consumer demand and consumer surplus
and studies presenting WTP estimates for healthcare interventions.
The theoretical foundations of willingness to pay as a measure of commodity
value are rooted in consumer demand theory. The area under the fixed incom
e consumer demand curve represents the consumer's maximum willingness to pa
y for the commodity. We identify 3 types of potential benefits from a new h
ealthcare intervention, namely patient benefits, option value and altruisti
c value, and suggest WTP questions for valuing different combinations of th
ese benefits. We demonstrate how responses to these questions can be adjust
ed for income effects and incorporated into economic evaluations.
We suggest that the lack of popularity of CBAs in the health area is relate
d to the perceived difficulty in valuing health benefits as well as concern
over how CBA incorporates the distribution of income. We show that health
benefits can be valued using simple survey techniques and that these values
can be adjusted to any desired income distribution.