ONE OF THE MOST vexing yet important questions that health services researchers must collectively address is which medical care interventions should be offered to patients and in what quantities. This question is rendered more salient every year as health care consumes an ever-growing proportion of the national economic output and is allocated in ever more lopsided and arguably inequitable ways. Health care now accounts for more than 13% of the gross domestic product, and per-capita expenditures on health care in 2001 grew at 10%: a rate that far exceeded inflation.1 Most health economists agree that the reason for runaway costs is the increasing use of services and treatments, many of which are marginally effective at best. At the same time, 40 million Americans are uninsured. In effect, our society rations people rather than rationing care.
Schematic diagram of the standard gamble showing branching of options. The respondent sets the value of x so that he or she is indifferent between the gamble and the certainty of health state 1.
Utility function. As the number of goods increases, the person's sense of well-being increases, but less than proportionately to the increase in the number of goods.
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