Health Versus Money

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Abstract
An important, but largely uninvestigated, value trade-off balances marginal nonhealth consumption against marginal medical care. Benefit-cost analysts have traditionally, if not fully satisfactorily, dealt with this issue by valuing health gains by their effects on productivity. Cost-effectiveness analysts compare monetary and health effects and leave their relative valuations to decision makers. A decision-analytic model using the satisfaction or utility gained from nonhealth consumption and the level of health enables one to calculate willingness to pay--a theoretically superior way of assigning monetary values to effects for benefit-cost analysis-and to determine minimally acceptable cost-effectiveness ratios. Examples show how a decision-analytic model of utility can differentiate medical actions so essential that failure to take them would be considered negligent from actions so expensive as to be unjustifiable, and can help to determine optimal legal arrangements for compensation for medical malpractice.