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Financing the War on Cancer

Author

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  • Koijen, Ralph
  • Van Nieuwerburgh, Stijn
Abstract
We propose a new solutions to finance life-extending treatments and apply it to immunother- apy. 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 that $6.8 billion a year could be freed up to pay for existing immunotherapies. We discuss various financing mechanisms that exploit this value creation, which differ depending on the relative bargaining power of insurers and consumers. Moreover, the large benefits that accrue to the life insurers, paid for by consumers and health insurers, call for new boundaries between insurance markets by combining life insurance and (catastrophic) health insurance. We discuss the broader implications of our insight for medical innovation and long-term care insurance markets.

Suggested Citation

  • Koijen, Ralph & Van Nieuwerburgh, Stijn, 2018. "Financing the War on Cancer," CEPR Discussion Papers 12990, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12990
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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