L12

Question 1

What approach is a CBA?

Answer 1

welfarist (tf not much help in health econ.)

Question 2

What is a CBA okay for in health econ.?

Answer 2

Societal costing perspective: ie. calculating if there is a net gain/loss from a policy change (is there a pareto improvement?) - usually used alongside other measures in health

Question 3

3 types of costs a CBA may look at?

Answer 3

1) NHS (eg. inpatient stays, medications)
2) Personal social services (eg. social workers, care homes)
3) Societal costs (NHS/PSS resource items, travel costs to hospital etc.)

Question 4

What assumption does CBA make? Issue with this?

Answer 4

It uses market prices as a proxy of opportunity cost
Issue: in a distorted economy this does not necessarily hold - real social values cannot be directly observed tf true economic value remains unknown!

Question 5

What can happen due to the cost methods used in CBA?

Answer 5

Cost estimates may become biased

Question 6

Solution to cost estimate bias?

Answer 6

Shadow pricing - due to numerous inputs/outputs in CBA, shadow pricing is a better estimator especially in areas such as mental health/elderly where true market valuations are difficult to obtain due to high levels of informal care!

Question 7

Why is valuing informal care so difficult?

Answer 7

Includes so many aspects: housekeeping time, time lost out in socialising, impact on carer’s QofL, time off work for carer, time spent travelling/during treatment/during consultation

Question 8

2 positive externalities of informal care?

Answer 8

Decreases cost of formal HC

Delays entry to nursing home entry

Question 9

2 negative externalities of informal care?

Answer 9

Time off work

Impact on carer’s QofL

Question 10

Why is it difficult to value informal care?

Answer 10

Market prices for the costs mentioned often do not have market prices! Therefore must use proxy goods to estimate the value

Question 11

How do proxy goods work?

Answer 11

They value the time spent care-giving at market price of a close substitute, for example at the wage rate of a professional caregiver

Question 12

Methods for estimating Monetary Value of Benefits?

Answer 12

1) Human capital approach

2) State preference

Question 13

2 types of stated preference?

Answer 13

1) Contingent valuation (WTP/WTA)

2) Discrete choice experiments

Question 14

How does the human capital approach estimate the monetary value? (2)

Answer 14

It equates the value of life extension/losses (due to morbidity) with forgone earnings that are discounted to their present value

Therefore the value of a person is defined by their potential, inherent net product evaluation through income gained through employment

Question 15

Why is the human capital approach not used much/at all anymore? (2)

Answer 15

It means retired people are valued much less than non-retired people

Also has been shown to create biases for white adult males, where wage differentiation likely represents discrimination rather than worker productivity

Question 16

2 other problems with the human capital approach?

Answer 16

1) excludes value to society of retired people spending their retirement/saved money
2) excludes cost of pain and suffering due to illness

Question 17

How do contingent valuation methods (eg. WTP/WTA) work?

Answer 17

Hypothetical scenarios are given to people to see their responses. From here, can infer WTP for HC goods/services (aims to directly estimate welfare gains/losses)

Question 18

What does a CV valuation need to ensure that it is? (3)

Answer 18

Understandable, realistic, informative

Question 19

3 advantages of CV methods?

Answer 19

1) Wider measure of benefits and costs than QALYs
2) Provides indication of STRENGTH of preference
3) Incorporates these preferences in the decision making process

Question 20

Explain why CV methods provide a ‘Wider measure of benefits and costs than QALYs’? (3)

Answer 20

1) Demand for information: people gain utility from being included in the process and from having a say
2) Process utility: people not only value what the outcome is, but the process of care received (how) (ie. how did we establish whether this intervention is used/not?)
3) Option value: utility gain from knowing HC ‘exists’ - CV methods include people therefore they have better awareness of the services people are being provided

DPO

Question 21

4 different techniques of asking for WTP?

Answer 21

1) Open-ended Qs (eg. what is your WTP?)
2) Payment scale Qs (eg. Circle amount that is max. WTP?)
3) Closed-ended Qs (eg. Would you be WTP £50?)
4) Bidding Qs (would you be willing to pay this bid price)

P-OCB

Question 22

Often researchers get data from a mix of question techniques and calc. an avg. WTP/WTA

Answer 22

.

Question 23

What is the idea of WTA?

Answer 23

How much compensation are people willing to accept in exchange for a loss/decrease in benefit

Question 24

Problem with WTP vs. WTA methods?

Answer 24

Framing: Often receive different figures for WTA vs WTP methods

Question 25

2 problems with WTA and explain them?

Answer 25

1) Overstating WTA (evidence shows for non-market goods WTA is roughly 2-5times higher than WTP)
2) Endowment effect (overstating WTA since it considers taking away a HC good or service that is already owned (loss aversion)) (people assign greater value to things they already have!)

Question 26

5 disadvantages of CV methods?

Answer 26

1) Bias dependent on framing of question or ‘anchoring effect’ where value in Q biases the answer given
2) Strategic bias (people may try and gain context from the question and answer untruthfully to benefit themselves)
3) Protest response (political aims affect WTP) - may give a zero bid or offer more for ‘warm glow’ feeling
4) Embedding effect (people struggle sometimes to identify the specific thing they value within a question)

5) WTP studies use ‘net benefit’ -> not necessarily societal benefit!
(also Qs often deemed ‘highly hypothetical’)

SPEWB

Question 27

What key findings have expert evaluations on CV methods found? (3)

Answer 27

1) Closed ended Qs best (open ended -> biased and erratic results)
2) Interview situation should be used
3) Use WTP (not WTA)

Question 28

see

Answer 28

pages 8 and 9 slides on GATS survey and smoking cessation!!!!!