Working Paper: CEPR ID: DP12990
Authors: Ralph Koijen; Stijn Van Nieuwerburgh
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.
Keywords: No keywords provided
JEL Codes: G22; I13; I31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| immunotherapy treatments (J68) | extend the survival rates of cancer patients (C41) |
| extend the survival rates of cancer patients (C41) | lower the liabilities of life insurers (G52) |
| immunotherapy treatments (J68) | lower the liabilities of life insurers (G52) |
| higher treatment success rates (I12) | greater financial advantages for the insurers (G22) |
| integration of life and health insurance markets (G52) | enhance the accessibility of life-extending treatments (I14) |