That is the title of my new paper in the Forum for Health Economics and Policy (FHEP) and the subtitle is “Estimating Insurance Value and Risk Preferences in Neurology.” This work is co-authored with Kyi-Sin Than, Jacob Fajnor, Jaehong Kim, Elizabeth Mearns, Stacey Kowal, Thomas Majda and Jakub Hlávka.
First, the research uses a multiple random staircase approach to measure the ‘insurance value’ of new treatments for neurological conditions impacting mobility and cognitive function. Next, we measured relative risk aversion (RRA) over quality of life (QoL) health states. This parameter can be added to the literature (e.g., Mulligan et al. 2024) on QoL risk preferences and can be incorporated into the generalized risk-adjusted cost effectiveness (GRACE) framework. The study’s abstract is below.
Neurological conditions adversely impact patients and society due to both quality-of-life decrements and high financial burden. Traditional cost effectiveness methods, however, may undervalue neurological treatments by assuming patients are risk neutral. This study seeks first to quantify insurance value for hypothetical treatments that delay the (i) cognitive and (ii) physical impairments of neurological conditions. Moreover, this study also measures risk preferences over neurological health states to inform parameterization of generalized risk-adjusted cost effectiveness (GRACE) analyses. Two national surveys – one evaluating cognitive impairments and the other mobility impairments – were administered to U.S. residents aged ≥21 years between July 2023 to November 2023. First, a multiple random staircase design was used to elicit respondents’ willingness-to-pay (WTP) for coverage of a hypothetical, new treatment that delayed the progression of cognitive or mobility impairments relative to the standard of care. Insurance value was calculated as the share of the stated preference estimated WTP that exceeded the expected quality-adjusted life year (QALY)-based value assuming risk neutrality. Second, to measure risk aversion, respondents were asked to (i) estimate health-related quality of life (HRQoL) for cognitive and mobility impairment health states using a visual analog scale, and (ii) choose between two hypothetical treatments with probabilistically varying across outcomes following the Holt and Laury (Holt, C. A., and S. K. Laury. 2002. “Risk Aversion and Incentive Effects.” American Economic Review 92 (5): 1644–55). Respondents’ indifference points were inferred from survey responses and used to estimate relative risk aversion (RRA) assuming a constant relative risk aversion utility function. Among n = 295 respondents meeting inclusion criteria for the cognitive survey, 64.9 % were female and the average age was 51 years (SD = 16). WTP for generous insurance coverage of a new treatment delaying cognitive impairment was $646.88 per year compared to $260.80 calculated under traditional (i.e. risk neutral) cost-effectiveness approaches, implying a risk-adjusted cost effectiveness threshold of $248,037 per QALY. Respondents were risk averse over cognitive impairment outcomes, with mean RRA of 1.49 (95 % CI: [1.29, 1.68]). Among the 259 respondents meeting the inclusion requirement for the mobility survey 51.0 % were female and the average age was 49 years (SD = 16 years). WTP for insurance coverage of a new treatment that would prevent progression of mobility impairments was $671.35 per year compared to $133.23 calculated under traditional cost-effectiveness, implying a risk-adjusted cost effectiveness threshold of $502,193 per QALY. Respondents were risk averse over mobility outcomes with mean RRA of 0.68 (95 % CI: [0.51, 0.86]). Due to insurance value, respondents exhibited high willingness to pay for treatments that reduced cognitive and mobility impairments caused by neurological conditions. Individuals were risk averse over both cognitive- and mobility-related neurology health states.
You can read the full paper here.
