Disability indices, the economic costs of illness, and social insurance: the case of multiple sclerosis.

Debilitating, long-term illness can impose a significant economic hardship on families affected with the illness and on the wider society as well. In addition to medical research to find a cure or a prevention for such illnesses, society may wish, in the interim, to allocate resources to compensate the families burdened by the illness for the economic losses they have suffered. Such compensation will take the form of a social insurance program. The socially optimal insurance program requires two crucial pieces of information: (i) an index of physical disability and (ii) an accurate assessment of the economic losses associated with each stage of disability as measured by that index. This paper reports on an initial attempt using U.S. data to provide these two important facts for one long-term, disabling illness: multiple sclerosis.