2.1 Economic evaluation, decision-modelling in health care, solidarity and distributional cost effectiveness

Question 1

why use economic evaluation in healthcare

Answer 1

resources are scarce in relation to healthcare needs

decision-making is a tool to prioritise between competing uses of resources, to obtain maximum benefit for any budget

Question 2

full economic evaluations examine:

Answer 2

both costs and consequences

comparing alternative courses of action

Question 3

partial economic evaluations examine:

Answer 3

costs and consequences

Question 4

full economic evaluation - which analysis

Answer 4

cost-effectiveness analysis (CEA)

cost-utility analysis (CUA)

cost-benefit analysis (CBA)

Question 5

partial economic evaluation - which analysis

Answer 5

cost-consequence analysis (CCA)

cost-minimization analysis (CMA)

Question 6

opportunity costs

Answer 6

if we choose option A, that means that we cannot dedicate the resources to option B.

The benefits that option B would have yielded are the opportunity costs of choosing option A.

Question 7

cost-consequence analysis

Answer 7

costs and consequences are presented, the reader decides how to value both.

the ‘simplest’ way of presenting the costs and consequences of two (or more) interventions. The objective of this analysis is to neutrally present all the information on costs and consequences of the alternatives.

cost and consequences are neutrally presented

Question 8

advantage cost-consequence analysis

Answer 8

all costs and consequences are communicated transparently, without normative judgement on the importance of various effects

Question 9

disadvantage cost-consequence analysis

Answer 9

it relies on the expertise of the reader to make a judgement about the costs and consequences

Question 10

cost-minimalization analysis

Answer 10

requires that the health outcomes of the alternatives are identical and only looks at which option has the lowest costs.

the type of costs that are taken into account depend on the perspective, but this usually only includes ‘direct’ costs of the treatment. Objective of this analysis is the minimization of costs

Question 11

advantage cost-minimalization analysis

Answer 11

easy to interpret

Question 12

disadvantage cost-minimalization analysis

Answer 12

only appropriate when there is equivalence in clinical outcome ( is hardly ever the case)

Question 13

costs-effectiveness analysis

Answer 13

compares the costs and consequences of two different options, using a ratio of cost per unit of health outcome. Can be used if outcomes vary, but can be expressed in common natural units (such as reduction in blood pressure, cases prevented, etc.)

1. calculate the costs / effects of both interventions
2. calculate the difference in costs / effects
3. calculate the incremental cost-effectiveness ratio

Question 14

advantage cost-effectiveness ratio

Answer 14

allows for comparing interventions across diseases and relatively easy to interpret

Question 15

disadvantage cost-effectiveness ratio

Answer 15

one-dimensional outcome

Question 16

cost-utility analysis

Answer 16

uses the quality-adjusted life year (QALY) as the measurement unit for the effect of the health intervention. Costs are usually measured in monetary terms, utility in terms of QALY’s. Cost-utility analysis can be considered a subset of cost-effectiveness analysis

Question 17

disadvantage cost-utility analysis

Answer 17

comparisons to interventions in other social domains (education, safety, etc.) can be challenging, as the reader still has to determine the monetary value of a QALY

Question 17

advantage cost-utility analysis

Answer 17

comparability of results to other studies

Question 18

cost-benefit analysis

Answer 18

compares the monetary costs and benefits of health care interventions.

Requires monetarizing health care outcomes using people’s willingness-to-pay.

Essentially, it seeks to answer the question: ‘how does total social welfare change?’, which makes it a welfarist approach.

Question 19

advantage cost-benefit analysis

Answer 19

provides a ‘straightforward’ answer to the question if a health intervention is worth financing. Allows for comparisons across other social domains.

Question 20

disadvantage cost-benefit analysis

Answer 20

monetarizing health outcomes is difficult, both practically and conceptually. Placing a monetary value on health is often considered immoral.

Question 21

how does a cost-benefit analysis uses standard welfare economics?

Answer 21

sum of individual utility = social welfare

determine social costs and benefits = willingness to pay

Question 22

Kaldor-Hicks criterion

Answer 22

• As long as winner can potentially compensate the losses of losers, there is an increase in welfare

Question 23

what is not a part of the calculation in a standard cost-benefit analysis?

Answer 23

distributional effects (do we perceive the outcome as fair?)

Question 24

productive and allocative efficiency

Answer 24

cost-benefit analysis allows for answering questions of allocative efficiency

cost-effectiveness analysis focusses rather on productive efficiency.

Question 25

allocative efficiency

Answer 25

the distribution of goods and services over various sectors maximizes social welfare, so production is aligned with consumer preferences.

This allows for comparing the welfare gains of unrelated policy domains, such as investing in breast cancer screening versus bike path infrastructure.

Allows for answering the question if an expansion of the budget (rather reallocation of the existing budget) is worthwhile.

Question 26

productive efficiency

Answer 26

a good (health outcome) is produced at the lowest possible cost.

So: the maximisation of health outcome for a given cost, or the minimisation of cost for a given outcome.

This allows for determining which intervention offers health against the lowest costs.

Question 27

values of QALY (Quality-Adjusted Life Year)

Answer 27

The quality of life takes a value between 0 and 1.

A value of 0 means death and a value of 1 means perfect health. Values below 0 are not possible.

Question 28

how is quality of life assesment made?

Answer 28

First, a health state is defined.

Second, individuals assess different health states and place a value on each of them.

Question 29

direct methods QALY measuring

Answer 29

visual analogue scale (rating scale)

time trade-off

standard gamble

Question 30

indirect methods QALY measuring

Answer 30

EQ-5D

SF-6D

Question 31

time-trade off

Answer 31

asks respondents to choose between two alternative scenarios: living in an impaired health state or living in full health for a shorter period of time.

Time in full health is varied until the respondent is indifferent.

This ‘point of indifference’ is the utility value. Utility = (years in health condition) / (years in perfect health)

Question 32

utility in time trade-off

Answer 32

Utility = (years in health condition) / (years in perfect health)

Question 33

standard gamble

Answer 33

asks people to choose between gamble (full health, but with risk of death) and certainty (living in an impaired health status for sure).

Again, the utility is the point at which the respondent is indifferent between both options.

Question 34

EQ-5D

Answer 34

Individual describes health condition using EQ-5D questionnaire.

This gives the EQ-5D health state. Other individuals express preference for this health condition, which gives ‘value sets’ for health states.

Question 35

what is a subset of cost-effectiveness analysis

Answer 35

cost-utility analysis

Question 36

ICER

Answer 36

incremental cost-effectiveness ratio

an intervention is compared to the next-best alternative (‘opportunity costs’).

That is: you should compare to the next most effective (in terms of QALY gains), non-dominated alternative.

Question 37

ACER

Answer 37

average / absolute cost-effectiveness ratio

an intervention is not compared to the next-best alternative, but to a baseline or ‘do-nothing’-option

Question 38

calculating ICER

Answer 38

1. calculate the costs and effects for both interventions
2. calculate the difference in costs and in effects = ‘incremental’ costs and effects
3. calculate the incremental cost-effectiveness ratio

Question 39

what is inherent to measuring cost-effectiveness

Answer 39

that you compare one intervention to another. When measuring cost-effectiveness, we are interested in the difference in costs and effect

Question 40

what can using ACER lead to?

Answer 40

using average cost-effectiveness ratios can lead to misleading results: an intervention might seem attractive, but in fact leads to small QALY-gains for high costs.

Question 41

dominance

Answer 41

an intervention is both more costly and less effective than an alternative

an intervention is both cheaper and more effective than the existing therapy.

Question 42

extended dominance

Answer 42

an option has an ICER (cost-effectiveness) that is greater than that of the more effective option.

Logic: if the budget does not allow for choosing option Z, then a combination of X and Z is more cost-effective (i.e. results in more health gains) than going for option Y.

Question 43

steps to ensure that you are calculating the ICERs in relation to the next-best alternative

Answer 43

1. sort the alternatives from least effective to most effective.
2. rule out strongly dominated alternatives (= option that is more (or equally) expensive, but less effective)
3. calculate ICERs based on the comparisons of moving to increasingly costly and increasingly effective alternatives.
4. if the ICER associated with moving to more costly alternative falls, then the lower-cost alternative used to calculate the ICER is extendedly dominated and should be ruled out.
5. recalculate ICERs based on comparisons of moving to increasingly costly but increasingly effective alternatives that are neither strongly nor extendedly dominated.

Question 44

what do we need to distinguish to apply cost-effectiveness analysis in practice?

Answer 44

1. mutually exclusive goods
2. independent interventions

Question 45

mutually exclusive

Answer 45

is when you can only implement one intervention at a time ‘per disease’

Question 46

independent interventions

Answer 46

is when you can implement more interventions, like health policy in general.

Question 47

four approaches for deciding on the ‘maximum acceptable ICER’

Answer 47

1. rule-based approach (‘Rule of thumb’)
2. league table approach
3. revealed preference
4. stated preference

Question 48

maximum ICER: rule based approach / rule of thumb

Answer 48

pick threshold values for ICERs, often (more or less loosely) based on empirics and/or the existing cost-effectiveness literature.

WHO has advised a threshold per QALY of 1 up to 3 times the GDP per capita for low- to middle-income countries.

Question 49

maximum ICER: league-table approach

Answer 49

1. rank all available interventions by cost-effectiveness (ICER from lowest to highest) (‘league table’)
2. calculate the cumulative cost of adopting a treatment. Start with adopting the most cost-effective treatment and work down the list.
3. continue until the budget constraint is reached. Note the ICER of the last treatment that can be financed: this is the maximum acceptable ICER.
4. if a future intervention has an ICER lower then this threshold, it should be adopted to produce health gains. Step 1 to 3 should be repeated to calculate the new maximum acceptable ICER.

Question 50

maximum ICER: revealed preference

Answer 50

approach to establish the maximum acceptable ICER: asses what decision-makers have been willing to pay for health gains in the past (‘revealed preference’).

Decision-makers can both be national decision-makers or doctors

willing to pay for health gains in the past (‘revealed preference’)

Question 51

shortcomings league-table approach by calculating maximum ICER’s

Answer 51

requires ‘full information’ (ICERs of all intervention) and requires identical methodological approach in calculating ICERs.

Question 52

shortcomings revealed preference approach by calculating maximum ICER’s

Answer 52

decision maker society. Assumes that past behaviour was ‘right’, without solid theoretical underpinning.

Question 53

maximum ICER: stated preference

Answer 53

approach uses individuals’ statements to estimate how much value they attach to a good/service or health effect (rather than their actions, as in revealed preference).

Stated preferences-approaches usually measure the preference for different treatments and/or health states. They are less common for estimating the maximum acceptable ICER.

Question 54

two broad categories in stated preference

Answer 54

1. choice modelling
2. contingent valuation method

Question 55

choice modelling

Answer 55

making people choose between two or more option, to reveal their preferences (often for specific characteristics or attributes)

Question 56

contingent valuation method

Answer 56

survey-based technique to determine monetary value of the effects of health technologies (‘willingness-to-pay’ for health gains)