ABSTRACT
Measuring health disparities is key to monitoring health systems, but hitherto disparities in the individual risk people face about their future health has been neglected. This paper integrates individual health risk into income-related health inequality measurement. We develop a rank dependent health inequality index that considers inequalities in each individual’s expected future health and the dispersion of their future health prospects. It is useful when a social planner wants to account for risk averse preferences in the assessment of income-related inequalities of future health prospects. The empirical application using Australian longitudinal data highlights that neglecting individual risk underestimates income-related inequalities in future health prospects since the poor not only face worse expected future health, but also faced greater dispersion in their future health prospects compared to the rich.
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