Worth

The human capital approach is a way for the economy to see what the value of a persons costs are. It is determined by their future earnings and estimates what their costs are in case of productivity loss. In the RadioLab podcast they talked a lot about what amount of time is worth money. For example, say there was a person with cancer and there was a drug that was made that could have a person live for 60 more days than planned. If that drug was $20,000 for all 60 pills that had to be taken once a day, are those 60 days worth the $20,000? Of course there are a lot of things that have to be taken into consideration. The people on the podcast talked a lot about the condition of the person, their age, and if they had the means to pay for the drugs. Another interesting thing they mentioned was as a society we need to come to a collective decision of how much money is too much money when it comes to certain drugs that come out from these big companies. Even though we need to come up with a decision together, at the same time we cant pinpoint how we all feel about how much time is worth a certain amount of money. Premium is defined as, The amount you pay for your health insurance every month. (HealthCare, 2021) The insurance company will determine every person’s premium depending on a few things. Health insurance companies do not like to take risks and if they are then its going to cost a big price. For a numerical example, a 21-year-old is less of a risk for insurance companies because they are young and are usually at their healthiest at this age. In return of the 21-year-old being less of a risk they may have cheaper health insurance. However, for someone who is 58 years old with diabetes and they have had lots of hospital visits in the past 10 years, they would be considered a risk and may have a higher premium to pay. 

The willingness to pay approach could be higher than the human capital approach for people who cant afford treatment costs because people may be willing to pay a smaller price in return for not dying. It is the maximum price they are willing to pay for something. In a healthcare example, a patient could stop making bad health choices so their health gets better, this can mean to stop smoking or drinking. This person is determining how much their life and time is worth to them instead of the human capital approach determining it through their future earnings and what they have already lost in productivity. The country I choose to run the GDP formula on is Brazil during 2020. The GDP in 2020 for them was 1.445 trillion dollars, their population was 212.6 million people. Following the formula that was in the podcast, you would divide the first number by the second number and get $6,796.80. After that, you would take that number 1-3 times that for one good year of life per person, the final answer is then $20,390.40 if you times it by three. 

References: 

Worth

Getzen, T. E. (2010). Health Economics and Financing. Wiley. 

HealthCare. (2021). Premium – healthcare.gov glossary. HealthCare.gov. Retrieved January 2022, from https://www.healthcare.gov/glossary/premium/

Peer 2 post: 

After listening to the RadioLab Podcast Worth as well as conducting some further research of my own, it is evident that the human capital approach to valuing human life revolves around the concepts of health losses and lost economic productivity. The Health Economics video that we watched for this weeks required materials highlights this particular approach. Dr. Sanjay Sharma discusses the concept of QALYs (quality adjusted life years) and how most governments/societies calculate cost per QALY as a standardized metric in order to evaluate new treatment interventions (YouTube, 2013). According to Turner et al. (2021), …the human capital approach involves placing a monetary value on the estimated productivity losses associated with a disease that are averted due to a health intervention. In tying this concept back to the podcast, lets consider the drug Sovaldi. From the perspective of the human capital approach to valuing human life, covering the cost for all individuals with Hepatitis C to take the drug would be over 5 billion dollars. The hosts of the podcast discussed how certain states put requirements on who would be eligible for the drug in order to save on costs. These particular states have clearly weighed the outcomes of individuals with Hepatitis C both with and without Sovaldi and believe that the estimated loss that would be averted due to Hepatitis C if all individuals across the board were eligible for the drug was not statistically significant enough.

According to the textbook, adverse selection means that the average losses in the insured group will be larger than the expected value for the employees as a whole (Getzen, 2010, p. 79). In the event that the people who are insured are high risk, adverse selection will occur (p. 79). Consider the following example presented in the textbook in Chapter 4: …charging $300 per month for people 35 years old and younger, $500 for people 35 to 50, $650 for people 51 to 60, and $900 for people 61 and older (Getzen, 2010, p. 79). Charging these particular premiums based on age demonstrates the principle of adverse selection within the world of insurance. This principle occurs due to the fact that the insurance company offered coverage to an individual who is actually significantly riskier than what the insurance company originally thought 

According to Getzen (2010), the willingness to pay (WTP) approach is defined as what the patient or society is willing to give up to attain an improvement in health (p. 64). Turner et al. (2021) provides a similar definition of this approach when they write The willingness to pay technique is based on the premise that the maximum amount an individual is willing to pay (or sacrifice) for a given commodity is an indicator of its value to them. When people are too poor to afford certain treatment costs for life-threatening illnesses, the WTP approach could certainly be higher than the human capital approach. Consider Susan Gubars experience with her battle against ovarian cancer. In discussing the concept of cost of cancer treatments, Susan explains in the podcast, …I was thinking that the American individualistic optimistic response would be well, whatever it takes. Whatever it takes. Life is worth it. Whatever it takes (Abumrad & Krulwich, 2014). This kind of attitude would result in the WTP approach most likely being higher than the human capital approach. However, it was interesting to listen further to Susans story. Susan shares wise words when she explains, You need to think deeply about the kind of life you want to live. Its not just about how many days, its about what kind of days (Abumrad & Krulwich, 2014). Are you willing to pay for the normal aspect of life to become polluted? (Abumrad & Krulwich, 2014). 

The hosts of the podcast discuss throughout the course of their conversation the idea of countries spending one to three times the GDP per capita. In very simplistic terms, this concept boils down to taking the entire ball of money that is in a country and dividing it per individualthen spending one to three times that amount on one more good year of life (Abumrad & Krulwich, 2014). I thought it would be interesting to pick a country and run the formula prior to the pandemic, so I picked the year 2017. AccordinWorldometer (2017), Chinas GDP in 2017 was $12,237,700,479,375 and the population was 1,421,021,791. My calculation is as follows: 

12,237,700,479,375/1,421,021,791 = approximately 8,612; 8,612 x 3 = 25,836. These numbers indicate that in 2017, China spent $8,612 to $25,836 on one more good year of life per individual.

References:

Abumrad, J., Krulwich, R. (Host). (2014, Dec 14). Worth [Audio podcast episode]. In Radiolab. WNYC Studios. https://www.wnycstudios.org/podcasts/radiolab/episodes/worth.

Getzen, T. E. (2010). Health Economics and Financing (5th ed.). Wiley.

Turner, H. C., Archer, R. A., Downey, L. E., Isaranuwatchai, W., Chalkidou, K., Jit, M., & Teerawattananon, Y. (2021). An introduction to the main types of economic evaluations used for informing priority setting and resource allocation in healthcare: Key features, uses, and limitations. Frontiers. Retrieved January 23, 2022, from https://www.frontiersin.org/articles/10.3389/fpubh.2021.722927/full 

Worldometer. (2017). GDP by country. Worldometer. Retrieved January 23, 2022, from https://www.worldometers.info/gdp/gdp-by-country/ 

YouTube. (2013). Health Economics. YouTube. Retrieved January 23, 2022, from https://www.youtube.com/watch?v=bUay9DV__G0&feature=share&list=PL7KhJGcwhiBRC3gK0MF-Wu-SkDDXdig_T.