Financing the War on Cancer / Ralph Koijen, Stijn Van Nieuwerburgh.

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Koijen, Ralph

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w24730.Publication details: Cambridge, Mass. National Bureau of Economic Research 2018.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We estimate the potential gains of life-extending treatments to life insurance companies and apply it to immunotherapy. These treatments promise to dramatically raise durable survival rates for a growing number of cancer patients but are often prohibitively expensive for patients and governments alike. Our main insight is that life insurance companies have a direct benefit from such treatments as they lower the insurer's liabilities by pushing the death benefit further into the future and raise future premium income. Using detailed survival data from clinical studies, we quantify the insurers' benefit from immunotherapy for melanoma patients. Extrapolating to 17 other cancer sites, we estimate the insurance sector's benefit to equal $6.8 billion a year. We discuss various financing mechanisms that exploit this value creation, which depend on the relative bargaining power of insurers and consumers. Moreover, the potential gains for life insurers, which could only accrue if health insurers cover the cost of the treatments and households finance the out-of-pocket expenditure, may warrant some exploration of new boundaries between life and health insurance. We discuss the broader implications for medical innovation and long-term care insurance markets.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w24730 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w24728 When Work Moves: Job Suburbanization and Black Employment /	nber w24729 Housing Wealth Effects: The Long View /	nber w2473 Recent Developments in Macroeocnomics /	nber w24730 Financing the War on Cancer /	nber w24731 Fear and the Safety Net: Evidence from Secure Communities /	nber w24732 The Gender Earnings Gap in the Gig Economy: Evidence from over a Million Rideshare Drivers /	nber w24733 Immigration and Redistribution /	Next

June 2018.

We estimate the potential gains of life-extending treatments to life insurance companies and apply it to immunotherapy. These treatments promise to dramatically raise durable survival rates for a growing number of cancer patients but are often prohibitively expensive for patients and governments alike. Our main insight is that life insurance companies have a direct benefit from such treatments as they lower the insurer's liabilities by pushing the death benefit further into the future and raise future premium income. Using detailed survival data from clinical studies, we quantify the insurers' benefit from immunotherapy for melanoma patients. Extrapolating to 17 other cancer sites, we estimate the insurance sector's benefit to equal $6.8 billion a year. We discuss various financing mechanisms that exploit this value creation, which depend on the relative bargaining power of insurers and consumers. Moreover, the potential gains for life insurers, which could only accrue if health insurers cover the cost of the treatments and households finance the out-of-pocket expenditure, may warrant some exploration of new boundaries between life and health insurance. We discuss the broader implications for medical innovation and long-term care insurance markets.