Why Society Needs to Value Health Improvements in Dollars

Abstract

Background. U.S. health planners typically set health objectives without information about how much of their resources the American people wish to devote to improved health.

Objectives. This paper indicates how ignoring attempts to measure how much of their funds Americans will trade for better health and equity could lead to allocations that may be efficient, but which could still lower welfare.

Methods. A graphical depiction of the process of health production and welfare maximization is supplemented by a mathematical model. Philosophical and empirical obstacles to measurement of social preferences are discussed.

Results. Knowing only how to improve public health with the most cost-effective techniques cannot inform planners about how to make tradeoffs between health and other sectors of the economy. Starting from a point of inefficient health production, it is shown that not every point of efficiency will improve the welfare of society.

Conclusions. More information about social preferences between health and other public spending could help inform exercises such as Healthy People 2000. Decision-makers using such information should be apprised of its inherent limitations and assumptions.