Health Economics 2013
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Transcript of Health Economics 2013
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Health Economics
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Learning objectives:
Define economics and its main elements.
Define economic efficiency.
Distinguish between different types of efficinecy.
Understand the role of economic evaluation inproviding information for decision-makers
Distinguish between the different types ofeconomic evaluation and when each may beappropriate .
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Economists view of the world
Pessimist: bottle empty
Optimist: bottle full
Economist: bottle WASTED!!
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The Health Economic problem
Unlimited healthcare
wants with rapid growth
in health expenditure.
Insufficient health sector
resources.
Choosing between wantswe can afford given our
resource budget.
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What is Economics?
The study of how men and society end up
choosing to employ scarce resources that
could have alternative uses
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Three elements fundamental to understanding
the economic perspective:
Choosing,
It aims to
provide a
framework forchoice so that
the full
implications of
all choices areclearly identified
before they are
made.
Scarce resources
Scarcity exists
since needs,
wants, demandsor desires will
always be
greater than
resourcesavailable to
meet them.
Alternative uses.
think about the
possible
alternative useof any resources,
which
economists call
opportunitycost.
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Concept of opportunity costOpportunity cost can be defined as the benefits given up in the
best alternative use of resources.
The aim is to choose activities where benefits outweigh
opportunity cost. Spending on health care is worthwhile as long as benefits are
greater than opportunity costs
Requires information on benefits of all possible uses of
nations resources!
Pg BPg A
Budget
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Are the benefits from what is chosen
greater than what is forgone?
Thus, opportunity cost can be defined as thebenefits given up in the best alternative use
of resources.
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What is Health Economics?
Theoretical framework to help healthcare professionals
,decision-makers or governments to make choices on
HOW to maximize the health of population givenconstrained health resources.
What health economists need is
To understand the relationship between resources used and healthoutcomes achieved by alternative options.
and compare!
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Decision-making based on evidence
ofeconomic efficiency willultimately allow more things to be
achieved with the same level of
resources
.
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Decision problem we face in health care
Should a new drug or new surgical procedure be adopted or whether aparticular medical procedure/health intervention worth undertaking?
Should one form of treatment be expanded (while another is contracted)?
After clinical effectiveness has been demonstrated, need to look to thebalance of benefits and costs; identification and estimation of the healthoutcomes or benefits and costs of health care.
A specialist hospital requests a license to establish a kidney transplantprogramme as claims it is cheaper than constant dialysis
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What is Economic Evaluation
Economic Evaluation compare the costs and
consequences of two (or more) alternative
health care interventions.
It is a way of thinking to improve the value for
money from investments in health care and
welfare .
Concerned with EFFICIENCY not just
effectiveness
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Economic Evaluation and Efficiency
Each of the techniques is aimed at answering different
questions: technical efficiency, allocative efficiency
Technical efficiency:
choice ofhowto provide health care
Minimize input for a given output
Allocative efficiency:
choice ofwhathealth care to provide
Maximize outputs(benefits) to given resources
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Technical efficiency
Producing a given level of output at a minimal cost or
producing the maximum amount of output for a given cost
Concerned with efficiency within a programme
Examples:
When providing hernia repair surgery, is it best to provide
conventional surgery or laparoscopic surgery?
When providing rheumatology clinics, is it best to provide anurse practitioner services or a consultant based service?
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Allocative efficiency
Programmes compete for the allocation of
scarce resources
Comparison across programmes such as
gynaecology, intensive care services, renal
services, etc.
Example:
Should there be an expansion of surgery for
rheumatology clinics or renal services?
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Economic evaluation and its
application
Tool to aid priority setting and resource allocation
Is increasingly being used
National Institute for Health and Clinical Excellence (NICE)
Provides recommendations on the use of new and existingmedicines and treatments within the NHS
Recommendations are based on a review of clinical and
economic evidence
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The choice ofwhat health care to provide is
about what economists call:
allocative efficiency.
The choice ofhow to provide health care is
about what economists call?
technical efficiency.
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Economic evaluation
is defined as the comparative analysis ofalternative courses of action in terms of both
their costs and consequences.
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Economic evaluation is
The comparative analysis of alternative courses of action in
terms of both their costs and consequences in order to assist
policy decisions (Drummond et al,1997)
Economic evaluation is notchoosing the cheapest.
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Types of Economic Evaluation
Cost effectiveness analysis (CEA),
Cost utility (CUA) and
Cost benefit analysis (CBA).
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When to use each of the above techniques will
depend of the nature of the question to be
addressed, which may be:
A choice between alternative clinical
strategies for a condition;
Timing of an intervention;
Settings for care;
Types and skill-mix of personnel providingcare;
Programmes for different conditions;
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Immediate (direct) effects on health:
In cost effectivenessanalysis these are usuallyclinically defined units appropriate to the area of study,such as lives saved, reduction in tumour size, 'changein blood pressure' etc.
In cost utilityanalysis, benefits from an interventioncan be as the impact on general well-being/ happiness/satisfaction, these are more generally labeled asutilities. Measures such as the quality adjusted lifeyear (QALY) are used to quantify this.
In cost benefit analysis, benefits might be consideredin the same terms as costs, which means that benefitsmust be valued in monetary termsby some means
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Cost-effectiveness analysis (CEA)
Effects are measured in terms of the most appropriate
uni-dimensional natural unit
Cost per unit effect
Examples:
Renal failure cost per life saved
Screening for Downs syndrome cost per Downs syndrome foetus
detected
Location of Long-term care cost per disability day avoided
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Cost-Effectiveness Analysis ( CEA )
CEA is concerned with technical efficiency issues, suchas: what is the best way of achieving a given goal orwhat is the best way of spending a given budget?
Example: What is the best way of treating renal failure? cost per
life saved.
What is the best way of screening for Downs
syndrome?
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Cost-utility analysis (CUA)
Effects are multi-dimensional
Combines life years gained with some judgment (or value orpreferences) on the quality of those lifeyears
Most popular measure:
quality adjusted life years (QALYs)
Can address technical efficiency and allocative efficiency
within the health care sector
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Cost-Utility Analysis
CUA is concerned with technical efficiency andallocative efficiency (within the health caresector).
The outcomes are multidimensional under thisform of analysis.
CUA tends to be used when quality of life is animportant factor involved in the healthprogrammes being evaluated.
CUA combines life years (quantity of life) gainedas a result of a health programme and the qualityof those life years.
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Cost Utility Analysis
CUA is a special case of CEA where QALYs are employed as themeasure of health status
CUA uses cost per QALY as means of ranking alternatives
Alternatives can be close substitutes, as in CEA, but need notbe
Alternatives need not even be health care measures
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Cost Utility Analysis
CUA have important implications for allocation of resources
CUA is still generally restricted to efficiency with which health
service resources are used; tends to neglect costs borne by
others (such as patients)
CUA may be used to rank alternatives but it cannot say with
certainty whether any option yields positive net benefits, this
is because costs and benefits are measured in different terms
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Calculating QALYs example
Weights:
Good health = 1
moderate health = 0.8
poor health = 0.5
LYs:
Year 1 + year 2 + year 3 = 3LYs (1+1+1)
QALYs:
Year 1(x0.5), year 2(x0.8), year 3(x1) = (0.5+0.8+1) =2.3 QALYs
Intervention may increase recovery such that
year 1(x0.8), year 2(x1), year 3(x1) = (0.8+1+1) =2.8 QALYs
No difference in LYs but gain in QALYs
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How a QALY is calculated
Patient x has a serious, life-threatening condition.
If standard treatment he will live for 1 year and his
quality of life will be 0.4
If he receives the new drug he will live for (1.25years), with a quality of life of0.6
Standard treatment:
1 (year's extra life) x 0.4 = 0.4 QALY New treatment:
1.25 extra life) x 0.6 = 0.75 QALY
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Therefore, the new treatment leads to 0.35
additional QALYs (that is: 0.75 -0.4 QALY = 0.35
QALYs).
The cost of the new drug is assumed to be 10,000,standard treatment costs 3000.
The difference in treatment costs (7000) is divided
by the QALYs gained (0.35) to calculate the cost per
QALY.
So the new treatment would cost 20,000 per QALY.
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Cost-utility Analysis
In CUA, the outcomes are measured in healthy years, towhich a value has been attached.
CUA is multidimensional and incorporates considerations ofquality of life as well as quantity of life using a common unit.
Result: Cost per unit of consequence (e.g. cost/QALY).
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Cost-benefit Analysis
CBA try to value the outcomes in monetary terms, so as tomake them commensurate with the costs.
Result: Net benefit or cost-benefit ratio.
CBAs rarely used in health care.
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Summary
Type of Analysis ResultConsequencesCosts
Cost Benefit
Cost Utility
Cost Effectiveness
Single or multiple effects
not necessarily common.
Valuedas utility eg. QALY
Different magnitude of a
common measure eg., LYs
gained, blood pressure
reduction.
Money
Money
Money
Cost per unit of
consequence eg. cost per
LY gained.
Cost per unit of
consequence eg. cost per
QALY.
As for CUA but valuedin
money.
Net
cost: benefit ratio.
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Summary
CEA Technical efficiency Uni-dimensionaloutcomemeasure
CUA Technical efficiency
Allocative efficiency within healthsector
Mulit-dimensional
outcomemeasure (healthonly)
CBA Technical efficiency
Allocative efficiency
Broadest
outcomemeasure ()
Easiest
Difficult/challengin
g
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The quality adjusted life years could be
used in which type of economic analysis?
a. Cost effectiveness analysis
b. Cost benefit analysis
c. Cost utility analysis
d. It would not be used
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Which of the followings is a feature of
cost benefit analysis?
a. Costs are related to clinical output measure
b. Outputs are assumed equal
c. QALYs are often used
d. Inputs and outputs are measured in
monetary forms
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In economics the central problem is:
a. Money
b. Consumption
c. Scarcity
d. Production
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Allocative efficiency is about:
a. the best way to achieve a given outcome
b. maximising total benefits within a given
budget
c. being aware that everyone is allocated a fair
share
d. spending as much of an allocated budget as
possible