HTA - lecture 3 - non medical costs

Question 1

direct costs within HC

Answer 1

medical costs

Question 2

indirect costs within HC

Answer 2

downstream costs: costs during life years gained

Question 3

direct costs outside HC

Answer 3

patients and family costs: informal care costs

Question 4

indirect costs outside HC

Answer 4

productivity costs: judicial costs, special education

Question 5

Productivity costs:

Answer 5

• “Costs associated with production loss and replacement due to illness, disability and death of productive persons, both paid and unpaid.”

Question 6

productivity costs: what?

Answer 6

• Productivity cost aims at quantifying impact of illness on production of individuals in monetary terms
• Productivity cost does not entail valuing life as such, pain, fear, discomfort or ‘role-functioning’
• (sometimes mis-specified as “intangible cost”)
• These elements are captured in QALYs (non-monetarily)

Question 7

why do we include these costs : pro

Answer 7

• Taking a societal perspective dictates incorporation of all relevant costs and effects
• PC are real and substantial societal costs
• Reduction of PC leads to real wealth increases
• Decision maker needs all available information
   Multiplier effect

Question 8

why do we include these costs : con

Answer 8

• Inclusion might favour health care programs for working individuals over others -> inequity –> people favoured over retired and younger people
• But wealth gains could be redistributed -> less inequity
• Recommendation: report PC separately, policymakers might choose specific weight per cost category

Question 9

how to include these costs?

Answer 9

• three methods were proposed:
  1. Transfer payments
  2. Human capital method –> most popular one
  3. Friction cost method
  (US Panel method (Gold et al., 1996))

Question 10

human capital method –> potential loss

Answer 10

• Uses (prognosis of) income as proxy for production losses
• Neoclassical economic theory suggests these are equal under perfect economic conditions = never unemployment
• Takes total time of absence (until retirement age) to determine length of relevant period
• Time absent * wage rate = total PC

Question 11

transfer payments

Answer 11

not commonly used; transferred from one person to another, but no indication about real production, so don’t use this as proxy for productivity
* Sometimes productivity costs are set equal to sick pay (as costs for society of absence from work)
* BUT…
- Social benefits not equal to production value
- Social benefits = redistribution of wealth, not affecting scarce resources => no costs!
* (Transfer payments may have medium term economic impact, but are not proxy for this)

Question 12

critique on HCM

Answer 12

• HCM estimates are maximum potential PC-losses
• Short term absence may not lead to HC-estimates of productivity costs due to:
• Colleagues taking over
• Making up after return to work
• Cancelling non-urgent work
• Long term absence may lead to lower productivity costs due to:
• Replacement by unemployed
• Reallocating workers and jobs
• Replacing labour by capital
• Hence, mechanisms in society that help to reduce the consequences of absence on productivity
• Productivity costs depend on length adaptation period

Question 13

friction cost method (FCM)

Answer 13

• Short term absence:
• Production loss may be less than proportional with absence period (elasticity 0.8)
• Long term absence:
• Adaptation period equals vacancy period*
• Unemployment level (in different segments of labour market) is important
• Plus time needed before seeking and training

Question 14

FCM continued

Answer 14

• Cost calculations based on the value of production (age and gender specific)
• Besides direct PC also medium-term macro-economic costs and replacement costs
• This method leads to much lower estimates of PC (FCM:HCM= 1:6), especially large differences for costs related to disability and premature death
   HCM counts, FCM limited over time

Question 15

three steps in costing in EE

Answer 15

1. Which costs are relevant: identification
2. How to measure these costs
3. How to value these costs

Question 15

1. Which costs are relevant: identification

Answer 15

• Informal caregivers don’t recognize themselves
• Are you an informal caregiver?
• No…., but I assist my husband with eating who is recovering from a heart attack

Question 16

Measuring time input of informal care

Answer 16

• Time measurement can be difficult:
• Separating informal care tasks from normal tasks (preparing a meal, cleaning the bed)
• ‘Joint production’: performing informal care tasks while doing other things (surveillance)
• Use validated questionnaires/diaries to measure time input per specific task and type of time sacrificed of informal caregiver
• When? About each 3 months

Question 17

3. valuation

Answer 17

• Time investment of informal caregivers
• Cost side of CE ratio
• Measurement of time only is insufficient
• Valuation of time

monetary valuation of informal care = number of hours caring x value of caring

Question 18

valuation methods

Answer 18

1. opportunity costs method
2. proxy good method
3. contingent valuation method
4. discrete choice

Question 19

opportunity cost method

Answer 19

• Value of informal care
• Specify activities sacrificed in order to provide care
• Hourly value per sacrificed activity
• Individual value per respondent
• Wage rates differ
  –> Same care, different value…
• Persons on low income/no income…?

Question 20

proxy good method

Answer 20

• Value of informal care
• Hours of informal care
• Hourly value based on shadow price
• Depends on task: household activity, personal care, practical support…
• Doing laundry ≠ giving medication
• Need shadow price for each type of informal care task

Question 21

opportunity costs versus proxy good

Answer 21

• Fairly similar methods
• Disadvantages:
• All hours are equally valued
  > Value of the 1st hour = Value of the 25th hour
• Only valuation of time, no full impact of caregiving (incl. burden and/or pleasure)

Question 22

contingent valuation (CV)

Answer 22

• Advantage: should be able to value the full impact of caregiving
• Minimum compensation for an extra hour of informal care (willingness to-accept; WTA)
• Maximum amount willing to pay to perform one hour less of informal care (willingness-to-pay; WTP)

Question 23

Pro’s & con’s CV

Answer 23

• Full impact of caregiving can be valued
• Different methodological & theoretical biases
• Questions of fairness (ability to pay)
• Respondents feel uncomfortable
• Putting a price on caring for a loved one
• Protest answers, zero’s or extreme outliers
• Question of validity & reliability

Question 24

Biases in CV

Answer 24

• Respondents appear to use strategies to answer questions
• People use anchors to derive WTP/WTA values
• Starting bid
• Cost of a (quasi)market substitute (nurse/housekeeper)
• Own wage rate (opportunity cost)
• Different types of biases
• • E.g. starting bid bias, order bias, learning bias, hypothetical bias…

Question 25

discrete choice experiment method

Answer 25

• Respondents are asked to choose between hypothetical options
• Assumption: choices reflect their preferences
• Hypothetical situations are described in terms of attributes  hypothetical options; enough data on what the prevalence is; ask what they would prefer
• E.g. number of hours informal care per week