Introduction to health economics Flashcards
LOs
- Understand scarcity, efficiency and oppurtunity cost and be able to apply these concepts to health
- Understand the difference between the basic types of economic evaluation and how outcomes are measured
- Be aware of concepts of equity and rationing
Key objectives of economic analysis
- To promote the efficient use of healthcare resource
- To ensure the maximum total benefit is derived from the finite resources available
Scarcity of resources
There are limited resources within healthcare systems
Therefore there is a need for efficiency, to maximise utility out of the resources available
Oppurtunity cost
- The cost of the next best alternative, foregone when an economic transaction is made.
- Choosing one treatment to fund means that funding cannot be spent on another treatment.
Why was NICE established?
Definition of economic evaluation
- A comparitive analysis of alternative courses of action in terms of both costs and consequences
Types of cost
- Direct cost (health and social services) + (non-health services)
- Indirect costs (wider cost implications)
Examples of Health and social resource use
Inpatient
outpatient
test
drugs
Examples of non-health resource use
Patient transportation
informal care
Indirect costs
Wider cost implications e.g. lost production
Types of outcome
- Measured in natural units (drug that lowers BP, measure BP)
- Proxy outcomes (cancers detected, change in cholesterol level)
- Condition specific measures (CAT-COPD assessment test)
- Generic measures (life yers gained)
Valuing health: Quality adjusted life-years (QALYs)
- Combines length and quality of life (‘utility’) into single unit to capture utility of treatment
- Used to weight life years based on QoL
- Quality of life: value health states with a mamimum value of 1 (perfect health) and value of 0 equivelant to death
QALY+ Σ((length of life) x (QoL) e.g. times period of life by QoL then add up these periods together
Euro-QoL EQ-5D
Questionnaire that covers all aspects of a patients life:
- Mobility
- Self care
- Usual activities
- Pain/discomfort
- Anxiety/ depression
Within each of these dimensions are 3 levels (new version has 5), each assigned a value.
Essentially (no problems-1, problems-2, extreme problem-3).
Sum up the answers to produce a QALY number
QALY calculation
e.g. QALY w treatment = 10
QALY wo treatment = 7.43
QALYs gained = QALYs with treatment - QALYs without treatment
10 - 7.43 = 2.57 QALYs gained
The Cost-effectiveness plane
Used to compare the cost effectiveness of 2 drugs
- Dominant treatments will be accepted
- Dominated treatments will not be accepted
- Use ICER to determine if extra cost is worth extra efficacy (vice versa)
Dominant treatment option
More effective and cheaper
Dominated treatment
ICER
Incremental Cost Effectiveness Ratio
ICER= (cost of new treatment-cost of standard treatment) / (consequences of new treatment - consequences of standard)
ICER = (Difference in cost) / (Difference in consequences)
An intervention currenlty used by NHS costs £8000 and has a benefit of 0.5 QALYs. A new intervention costs 10,000 and has a benefit of 1 QALY.
What is the ICER?
10,000 - 8,000 = +2,000
1 - 0.5 = 0.5
2,000 / 0.5 = £4,000 per additional unit of benefit (e.g. QALY)
Main types of economic evaluation
- Cost effectiveness analysis
- Must choose ONE single outcome
- Increased survivial
- Reduction in symptoms
- Cost-utility analysis (NHS preffered)
- Must consider quality of life
- Quality Adjusted Life Years (QALYs)
- Cost-benefit analysis
* Measures benefits in monetary terms
Cost-effectiveness analysis
- One of the main techniques used
- Consequences in most appropriate natural or physical units (e.g. BP)
- Decision rule: dominance (less costly, better outcomes) or ICER
- Results in terms of “cost per unit effect” e.g. cost per cancer detected
Hypothetical example of Cost effectiveness analysis
Assume a trial of 2 alternative chemotherapy regimes (A & B) for ovarian cancer. The main outcome measure is survival at 1 year.
A. B.
Mean cost. £45,900. £23,450
Survivors at 1 year. 33. 29
ICER = (23450-45900) / (29-33) = £5612.5 per additional survivor
Cost-utility analysis (CUA)
- Outcomes are measured in Quality Adjusted Life Years (QALYs) gained
- Combine life years and quality of life
- Can be used to compare across treatment areas
- Decision rule: dominance or CU ratio
- Results in cost per additional
- Required by decision makers (e.g. NICE)
Is NHS preffered
Decision Rule
- NICE consider a new therapy to be cost effective if the cost per QALY is less than £20,000
- £20,000 to £30,000 per QALY is an area that will be considered taking other factors about uncertainty into account
- Cancer fund allows more expensive treatment therapies to be funded
Acts as a threshold in attempts to facilitate clear and consistent decision making.
“No” decisions are still unpopular and “Yes” decisions still have a cost.
Equity in the NHS
- Fairness in distribution of healthcare and health outcomes
- Attempt to address equitable concerns reuires departure from pursuit of maximisation (of QALYs, etc.) to ensure a more equal distribution (a QALY of someone who is going to die is not the same as a QALY of someone who broke their arm)
- What do we want to distribute fairly?
- Health
- Use of health care
- Access to health care
Types of equity
- Horizontal equity
- Vertical equity
Horizontal equity definition
- People with equal healthcare needs receive equal access to treatment irrespective of demographics
- Factors/barriers e.g. geography, waiting times, patient information
Vertical equity defintion
- Individuals with unequal needs should be treated according to their differential need
- Obvious but operationally difficult
- How unequal do conditions need to be in order to pursue equity objectives (chronic versus trivial complaints)?
Types of rationing
- Explicit rationing
- Denial (ineligibity, cot considerations, “postcode lottery”)
- Delay (e.g. waiting times)
- Deterrence
- Dilution (e.g. reduced time with patients)
- Implicit rationing
- Efficiency
