Healthcare Economics Flashcards
What is healthcare economics?
It is concerned with making the most of societies’ resources by maximizing social benefit subject to the constraints imposed by resource availability
It assumes resources are scarce
It is about:
- Net benefits
- Evaluating services
- Providing information to assist in the allocation of
scarce resources in an efficient way and equitable way
Why is there a need for economic assessment?
Recognises the reality of fixed NHS resources - and brings this to the attention of the public
Exposes the opportunity cost of new interventions
Enables consistency in investment - and disinvestment - decisions
Helps to direct innovation into those areas regarded as priorities by the health system
Why is health economics important?
Doctors are involved in decisions about resource allocation
Health economics helps to make some of the principles for resource allocation explicit
Need to understand basics of economic evaluation to contribute to/learn from evidence
What are the 6 basic concepts in health economics?
Scarcity
- Needs outstrips resources. Prioritisation is inevitable.
Efficiency
- Getting the most out of limited resources
Equity
- The extent to which distribution o resources is fair
Effectiveness
- The extent to which an intervention produces desired
outcomes
Utility
- The value an individual places on a health state
Opportunity cost
- Once you have used a resource in one way, you no
longer have it to use in another way
Explain opportunity cost.
When deciding to spend resources on a new treatment, those resources cannot now be used on other treatments
The opportunity cost of the new treatment is the value of the next best alternative use of those resources
- Cost is viewed as sacrifice rather than financial
expenditure
Opportunity cost is measured in BENEFITS FOREGONE
By choosing to use resources in one particular way, other opportunities for using those resources are foregone
So for a limited budget the most effective ix of services to fund will be that which generates the greatest aggregate (overall) benefit
The aim of economics is to ensure that we do those activities whose benefits outweigh their opportunity cost
Many considerations in defining the greatest aggregate benefit connected to view about the ethical implications of different conceptions of welfare
What are the two types of efficiency associated with healthcare economics?
Technical efficiency - you are interested in the most efficient way of meeting a need (e.g. should antenatal care be community or hospital-based?)
Allocative efficiency - where you are choosing between the many needs to be met (e.g. fund hip replacements or neonatal care)
What is economic evaluation?
The comparison of resource implications and beliefs of alternative ways of delivering healthcare
Can facilitate decisions so that they are more transparent
Underpinned by concepts of:
- Scarcity/sacrifice
- Efficiency
- Opportunity cost
- Utility
It is a system whereby competing programmes are evaluated in terms of their costs and consequences
Tell me about economic decision making.
An economic analysis compares the inputs (resources)) and outputs (benefits and value attached to them) of alternative interventions.
This allows better decisions to be made about which interventions represent best value for investment
How do we measure cost?
Identify, quantify and value resources needed
Categories of costs: - Costs of the health care services - Cost of patient's time - Costs associated with care-giving - Other costs associated with illness - Economic costs borne by employers, other employees and the rest of society
How do you measure benefits? (healthcare economics)
Benefits are hard to measure
Improved (or maintained) health hard to value
Categories of benefits/consequences:
- Impact on health status (in terms of survival or quality of
life or both)
- Savings in other health care resources (such as drugs,
hospitalisations, procedures, etc.) if the patient’s health
state is improved
- Improved productivity if patient, or family members,
returns to work earlier
What are some problems (and solutions) to economic evaluation?
Usually based on some assumptions
But sensitivity analysis can be used to check effects of assumptions
Some health benefits are not felt for some years - e.g. benefits of smoking cessation
Discounting is a method of calculating present values of inputs and outcomes which accrue in the future
How do you compare costs and benefits?
4 types of economic evaluation:
- Cost minimisation analysis
- Cost effectiveness analysis
- Cost benefit analysis
- Cost utility analysis
All consider costs but differ in the extent they attempt to measure and value consequences/benefits
Explain cost minimisation analysis
Outcomes assumed to be equivalent
Focus on measurement is on costs (i.e. only the inputs)
Not often relevant as outcomes rarely equivalent
Possible example
- Say all prostheses for hip replacement improve mobility
equally, Choose the cheapest one
Explain cost effectiveness analysis.
Used to compare drugs or interventions which have a common health outcome e.g. reduction in blood pressure
Compared in terms of cost per unit outcome e.g. cost per reduction of 5mm/Hg
If costs are higher for one treatment, but benefits are too, need to calculate how much extra benefit is obtained for the extra cost
Key question: Is extra benefit worth extra cost?
Explain cost benefit analysis.
All inputs and outputs valued in monetary terms
Can allow comparison with interventions outside healthcare
Methodological difficulties e.g. putting monetary value on non-monetary benefits such as lives saved
“Willingness to pay” often used but this is also problematic
Explain cost utility analysis.
Particular type of cost effectiveness analysis
Cost utility analysis focuses on quality of health outcomes produced or foregone
Most frequently used measure is quality adjusted life year (QALY)
Interventions can be compared in cost per QALY terms
What are QALYs?
Used since 1970s
Allows broad comparisons across differing programmes
QALY = Quality Adjusted Life Year
QALYs adjust life expectancy for quality of life:
- 1 year of perfect health = 1 QALY
- Assumes that 1 year in perfect health = 10 years with a
quality of life of 0.10 perfect health.
How is quality of life measured?
Measured on a generic HR-QoL instrument:
- The EQ-5D
What are some alternatives to QALYs?
Health Year Equivalents (HYEs)
Saved-young-life equivalents (SAVEs)
Disability Adjusted Life Years (DALYs)
But NICE uses QALYs
How does NICE decide on which interventions to fund?
Technology appraisals:
- Clinical effectiveness
- Cost effectiveness
Process:
- Identification of topics - DoH, professionals, patients, carers, public
- Scoping - NICE/DoH
- Assessment - HTA assessment groups
- Appraisals - committee
How does NICE use QALYs?
To assess cost effectiveness, the QALY score is integrated with the price of treatment using the incremental cost-effectiveness ratio (ICER)
ICER represents the change in costs in relation to the change in health status
The result is a ‘cost per QALY’ figure, which allows NICE to determine the cost-effectiveness of the treatment.
How does NICE make its decisions?
Committee makes judgement on ‘most plausible’ Incremental Cost Effectiveness Ratio (ICER)
Below £20K per QALY technology will normally be approved
£20-£30K judgements will take account od:
- Degree of uncertainty
- If change in HRQL is adequately captured In the QALY
- Innovation that adds demonstrable and distinctive benefits not captured in the QALY
Above £30K need an ‘increasingly stronger case’
What are the criticisms of QALYs?
Do not distribute resources according to need, but according to the benefits gained per unit cost
Technical problems with their calculations
QALYs may not embrace all dimensions of benefit; values expressed by experimental subjects may not be representative
Controversy about the values they embody
RCT evidence is not perfect: - Comparison therapies may differ - Length of follow up - Atypical care - Atypical patients - Limited generalizability - Sample sizes (Statistical modelling can address some problems and areas of uncertainty)
