Willingness-to-pay to prevent Alzheimer’s disease: a contingent valuation approach

1. Fall 2013: Econ 339 Final Presentation Mary Reed Date of presentation Willingness-to-pay to prevent Alzheimer’s disease: a contingent valuation approach Reference: RashmitaBasu (2013), Willingness-to-pay to prevent Alzheimer’s disease: a contingent valuation approach, International Journal of Health Care Finance and Economics: 223-45. Aug. 2013. Total:_________

2. Alzheimer’s disease is the most common form of dementia, affecting 13% of Americans from ages 65 and older. • AD is the 5th leading cause of death for this age group. • AD is expected to increase from 4.5 million in 2000 to 13.5 million in 2050.

3. Costs and Projections: • A patient with AD will have 3 times greater average Medicare expenses then a patient without AD. Medicare expenditures are expected to double. • To put this in perspective: Expenditures in Medicare will rise from $95 billion (2005) to $189 billion in 2015. • These costs will consumer 40% of Medicare budget by 2050.

4. The purpose of this study was: • To find evidence of older adult’s WTP for a prescription drug which could prevent AD • Determine whether we can predict how WTP will vary depending on perceived risk and other variables. The other variables: age, gender, marital status, education, wealth, and race/ethnicity. • Normative perspective: Measure the direct monetary value of a drug. • Behavior perspective: Understand demand behaviors.

5. How study was conducted: • Step one was to survey a group of individuals about medical information and their WTP for the AD preventive drug. • Biennial survey: meaning the survey was conducted every 2 years as the respondents and their spouses aged from middle adulthood into older age. • The data was obtained by Health and Retirement Study. • Survey respondents were ages 50 and up.

6. Next step in study: Use information gathered to run a regression analysis. • A regression analysis will statistically show us the relationship between: • Dependent Variable: Respondent’s WTP • Independent Variables: Age, gender, marital status, education, wealth, and race/ethnicity. • In other words, the regression analysis will depict how and if a change in one of the independent variables will cause a change in the dependent variable.

7. Results: • Average age was 68 years old but respondents ranged from 50 to 96 years old. Majority, 98.5%, were ages 50-80. • More then half, 53%, of respondents were female. • Racial composition: 84% White, 9.8% African American, 5% Hispanic, the remainder of 1.2% was considered “other”. • Majority of respondents were married. • Average level of education was 12.7 years.

8. What variables significantly influenced WTP: • On average, respondents reported 30% chance that they would develop AD within 10 years. People with higher perceived risk were more WTP. • Age was negatively related to WTP. Every year of age reduced the WTP by 3%. • Wealth was positively related to WTP. For every 1% increase in wealth, there was a 0.08% increase in WTP. • Racially, Hispanic respondents showed a lower WTP then Non-Hispanics.

9. Why this study is important: • Understanding preferences for healthcare purchasers and providers. For instance, the study mentions how offering additional information on the benefits of AD prevention amongst the Hispanic population may change the number of people in this category who are WTP for preventive care. **This is important since the Hispanic elderly population in the U.S. is growing double the rate of Non-Hispanics.**

10. Deciding whether to spend money on AD research and drugs which may help prevent Alzheimer’s disease. • How perceived risk can influence the decision of WTP for not only AD but other diseases such as cancer. This concludes my presentation. Are there any questions?

11. Work Cited: Basu, Rashmita. "Willingness-to-pay to Prevent Alzheimer's Disease: A Contingent Valuation Approach." International Journal of Health Care Finance and Economics 13.3-4 (2013): 223-45. Aug. 2013. Web. 01 Nov. 2013.