A game-theoretic framework for estimating a health purchaser’s willingness-to-pay for health and for expansion

A health purchaser’s willingness-to-pay (WTP) for health is defined as the amount of money the health purchaser (e.g. a health maximizing public agency or a profit maximizing health insurer) is willing to spend for an additional unit of health. In this paper, we propose a game-theoretic framework for estimating a health purchaser’s WTP for health in markets where the health purchaser offers a menu of medical interventions, and each individual in the population selects the intervention that maximizes her prospect. We discuss how the WTP for health can be employed to determine medical guidelines, and to price new medical technologies, such that the health purchaser is willing to implement them. The framework further introduces a measure for WTP for expansion, defined as the amount of money the health purchaser is willing to pay per person in the population served by the health provider to increase the consumption level of the intervention by one percent without changing the intervention price. This measure can be employed to find how much to invest in expanding a medical program through opening new facilities, advertising, etc. Applying the proposed framework to colorectal cancer screening tests, we estimate the WTP for health and the WTP for expansion of colorectal cancer screening tests for the 2005 US population.