The Welfare Burden of Type 1 Diabetes – Center for Health Decision Science

Conventional methods for valuing health and longevity have several well-known limitations. In a CHDS seminar, Maddalena Ferranna discussed social welfare function analysis, which addresses the drawbacks of these methods. Ferranna is an assistant professor in the Department of Pharmaceutical and Health Economics at the University of Southern California.

Conventional valuation methods rely on either (1) estimates of averted medical and other costs plus productivity losses, or (2) estimates of individuals’ willingness to pay for changes in their own risks. These methods fail to address the equity of the impacts. They depend on the income of those affected and ignore how the impacts are distributed across advantaged and disadvantaged individuals. Social welfare analysis addresses these limitations.

In this seminar, Ferranna applied these alternative approaches to estimate the global burden of Type 1 diabetes. She began by discussing the features of conventional approaches. She then described the approach she used for social welfare analysis. She first estimated impacts on individual lifetime wellbeing, including mortality, disability, and income losses associated with the disease. She next weighted the results by the marginal utility of income, which adjusts for the greater value of a dollar to a poor person than to a wealthy person. Under this approach, the worst-off in well-being terms are low-income individuals with short quality-adjusted longevity. Finally, she aggregates these estimates of individual wellbeing using a social welfare function that incorporates distributional equity concerns, exploring the effects of differing degrees of inequality aversion.

Ferranna finds that the choice of valuation method substantially affects the estimates of the burden of disease. Conventional methods underestimate the burden borne by lower-income countries in comparison to social welfare analysis, influencing the ranking of global health priorities.

Learn more: Read the publication, Social Welfare Functions and Health Policy: A New Approach
Learn more: Read the publication, The Global Burden of the COVID-19 Pandemic: Comparing Benefit–Cost Analysis and Social Welfare Analysis
Learn more: Read the publication, From Benefit–Cost Analysis to Social Welfare: A Pragmatic Approach