Economic Evaluation Chap13 Flashcards
Cost–benefi t analysis
An economic evaluation technique in which outcomes are expressed in monetary terms.
Cost–benefi t analysis (CBA) is a method of economic evaluation where the monetary value of the resources consumed by a health intervention (costs) is compared with the monetary value of the outcomes (benefi ts) achieved by the intervention. While the lay meaning of ‘benefi t’ is ‘something good’, in CBA it means the ‘monetary value of the outcomes’ achieved by an intervention.
In practice, however, the monetary valuation of benefi ts in CBA is diffi cult. Placing a value on human life and health can be extremely hard. Decision-makers can also fi nd a single amount representing costs and benefi ts of a programme ‘disconcertingly impenetrable’ (Fox-Rushby and Cairns 2005).
Cost-effectiveness analysis.
An economic evaluation technique in which outcomes are expressed in health units such as life years saved.
Cost-effectiveness analysis (CEA) is the most commonly used form of economic evaluation in the health sector. Under this method, the value of the resources spent on an intervention is compared with the quantity of health gained as a result. Unlike CBA, which compares monetary costs with monetary outcomes, CEA compares the cost of an intervention with the intervention’s health outcomes. Cost-effectiveness is typically expressed as a ratio of costs divided by health outcomes. The cost-effectiveness ratio (CER) of one intervention can then be compared with that of another.
Cost–utility analysis.
An economic evaluation technique where outcomes are expressed in health units that capture not just the quantity but quality of life.
Cost–utility analysis (CUA) is a broader form of analysis than CEA but a variant of that general approach (Drummond et al. 2005) and for that reason is often discussed under the heading of ‘cost-effectiveness analysis’. Using CUA, one can assess the quality of, for example, life years gained, not just the crude number of years lived in a particular health state. This is especially useful for those interventions that may extend life but at the expense of side-effects (e.g. treatment for certain types of cancer). The most common measures of consequences in CUA are the quality adjusted life year (QALY) and the disability adjusted life year (DALY).
CUA was developed to address the problem of conventional CEA, which did not allow decision-makers to compare the value of interventions for different health problems. While this is a defi nite strength of the approach, some have questioned the ability of CUA to capture all the valued characteristics associated with an intervention. For example, QALYs do not capture differences in the process characteristics of interventions (such as respect, autonomy, provision of information, etc.), despite substantial evidence that patients do attach value to these (Mooney 1994; Howard et al. 2008).
Economic evaluation
Compares the costs and consequences of alternative health care interventions to assess their value for money.
How can the impact of health problems be measured?
The impact of health problems can be measured as: • the number of cases; • the number of deaths; • the amount of disability, pain or suffering; • the number of people with a risk factor; • the amount of money spent on a health problem; • the amount of lost income due to a health problem.
For example, the death during childbirth of a mother who already has two children and who is the only schoolteacher in the village can be measured in various ways, such as:
• a ‘case’ of maternal mortality; • the number of years of life she has lost by dying prematurely; • the amount of her wages that her family will no longer receive; • the effect of the loss of her wages, particularly on her school-age children who can’t be educated because the money for school fees is no longer available; • the loss to her husband who misses her company and her skills as a housekeeper and part-time farmer; • the loss of her guidance and training for her young children; • the loss of the investment her own parents made in training and educating her to be a teacher; • the loss to the school system which now has to hire or train new teachers to replace her.
divide the resources into seven categories:
• personnel; • buildings and space; • equipment; • supplies and pharmaceuticals; • transportation; • training; • social mobilization and publicity including information, education and communication.
Outcomes and consequences of economic evaluations
The goal of an intervention is to reduce the impact of a health problem. For economic evaluations, you need to measure how much the impact is reduced. To fi gure out if the intervention has done enough good to justify its cost, you need to know how the health problem changes after the intervention. Specifi cally, you need to know what occurs as a result of the intervention, in other words, the outcome or consequences of the intervention. You can assess this change by measuring the difference in the health problem in one of two ways. You can either measure the impact of the health problem before and after the intervention, or with and without the intervention. For this reason economic evaluations are often done alongside clinical trials or some other form of intervention evaluation where these impacts are being specifi cally assessed. Since impact is assessed using either health measures (number of deaths, number of cases, etc.) or their monetary equivalent, and since outcome is merely the difference in impact, units used to measure outcome are identical to the units used to measure impact.
Some decision must be made as regards the relative value of the interventions. This is how economics as a discipline can assist.
According to Drummond et al. (2005) two features characterize economic evaluation:
it is a comparative analysis (i.e. it compares two or more different options), and it compares these options in terms of their costs and their consequences. Figure 13.2 illustrates this. Two alternatives are presented, A and B. When assessing programmes A and B, we compare the difference in costs with the difference in consequences. This is called an incremental analysis.
Note
Table p. 193
Cost benefit indicators
Two common costbenefi t indicators are:
- net present value (NPV): this result is expressed as a single number with monetary units;
- benefi t–cost ratio (BCR): this result is expressed as a ratio of benefi ts to costs.
NPV is calculated by subtracting the cost of an intervention from its benefi ts. When the benefi t is bigger than the cost, the net benefi t will be greater than zero. This says that the value of the outcomes is worth more than the value of resources used up by the intervention, so the intervention is worthwhile.
For each of the policy questions listed below, identify which type of economic evaluation would be most appropriate to use and explain why.
1 The Ministry of Finance wants to know whether it is worth investing further resources into malaria control or building new primary schools?
2 The Ministry of Health wants to compare the costs of receiving intravenous antibiotics in a hospital with receiving the same antibiotics (at the same doses) at home via a home health care service.
3 The Ministry of Health wants to compare the costs and outcomes of two interventions for the treatment of early stage breast cancer: mastectomy without breast reconstruction compared to breast conserving surgery and radiotherapy (breast conservation).
4 A malaria control programme wants to use economic evaluation to compare two different diagnostic strategies for malaria treatment: microscopy and rapid diagnostic tests.
1 CBA, as here we are dealing with the size of the budget and comparing interventions across different sectors of the economy.
2 CMA, as outcomes should be the same.
3 CUA, as there are likely to be differences in mortality and morbidity.
4 CEA, as there is likely to be a common unit of effect – e.g. cost per case detected.
Comparing the measures
CEA and CUA are based on the production function approach (see Chapter 5) which focuses on the least cost way of producing a good whether it be a car or a hip replacement. These techniques compute the ratio of input to output (or vice versa) with inputs valued in monetary terms and is therefore a measure of economic effi ciency. CEA considers only one measure of effectiveness and as a result often omits important social costs and benefi ts. CBA can be used to measure both economic and allocative effi ciency questions. It can be measured either within the health care sector or across other sectors of the economy because in principle it assesses all relevant costs and benefi ts that result from an intervention. While in theory this provides the most comprehensive form of economic evaluation, its use in the health sector has been limited largely due to the practical problems of measuring and valuing these benefi ts. In addition to economic and allocative effi ciency, CBA is based on Pareto welfare optimization. In other words, the aim of CBA is to provide a framework for assessing the ability of an intervention or policy to offer a potential Pareto improvement
Stages of economic evaluation
There are four broad steps in undertaking an economic evaluation:
• defi ning the decision problem (also known as ‘framing the evaluation’);
• identifying, quantifying and valuing the resources needed;
• identifying, quantifying and valuing the health consequences;
• presenting and interpreting the evidence for decision-making.
Discounting
Discounting is a procedure economists use to relate costs and outcomes occurring at different times to a common basis
