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The Role of Willingness-to-Pay in Resource Allocation in a National Health Scheme

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journal contribution
posted on 08.06.2017, 02:28 by Richardson, Jeff
Argument and evidence are presented to support the claim that individual based willingness to pay is an inappropriate criterion for decision making in the health sector. The following propositions are supported: 1 that to achieve allocative efficiency we must eventually place a dollar value on life; 2 that proposition 1 does not imply conventional willingness to pay. 3 that willingness to pay for one's own life is an unhelpful concept in the context of a National Health Scheme. 4 that the population would reject the willingness to pay criterion as the basis for measuring benefits in a national health scheme. 5 that people accept paternalism; they are prepared to override other people's preferences and endorse the importance of extra welfarist objectives and, more specifically endorse the maximisation of health per se, not utility. 6 that the argument that social decision making is imperfect (Arrow's Impossibility Theorem) and that we must therefore have individual based WTP is wrong; Despite the general rejection of individual based WTP, it must be accepted in some contexts. Consequently, total health resources must be allocated according to different criteria in different contexts and the boundaries between these contexts may shift over time and differ between countries It is concluded that social willingness to pay is a function of outcome, process and context. Consequently, viewed from a contextless perspective decision criteria will appear incoherent and inconsistent.


Year of first publication



Centre for Health Program Evaluation