L12 Flashcards
What approach is a CBA?
welfarist (tf not much help in health econ.)
What is a CBA okay for in health econ.?
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
3 types of costs a CBA may look at?
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.)
What assumption does CBA make? Issue with this?
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!
What can happen due to the cost methods used in CBA?
Cost estimates may become biased
Solution to cost estimate bias?
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!
Why is valuing informal care so difficult?
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
2 positive externalities of informal care?
Decreases cost of formal HC
Delays entry to nursing home entry
2 negative externalities of informal care?
Time off work
Impact on carer’s QofL
Why is it difficult to value informal care?
Market prices for the costs mentioned often do not have market prices! Therefore must use proxy goods to estimate the value
How do proxy goods work?
They value the time spent care-giving at market price of a close substitute, for example at the wage rate of a professional caregiver
Methods for estimating Monetary Value of Benefits?
1) Human capital approach
2) State preference
2 types of stated preference?
1) Contingent valuation (WTP/WTA)
2) Discrete choice experiments
How does the human capital approach estimate the monetary value? (2)
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
Why is the human capital approach not used much/at all anymore? (2)
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
2 other problems with the human capital approach?
1) excludes value to society of retired people spending their retirement/saved money
2) excludes cost of pain and suffering due to illness
How do contingent valuation methods (eg. WTP/WTA) work?
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)
What does a CV valuation need to ensure that it is? (3)
Understandable, realistic, informative
3 advantages of CV methods?
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
Explain why CV methods provide a ‘Wider measure of benefits and costs than QALYs’? (3)
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
4 different techniques of asking for WTP?
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
Often researchers get data from a mix of question techniques and calc. an avg. WTP/WTA
.
What is the idea of WTA?
How much compensation are people willing to accept in exchange for a loss/decrease in benefit
Problem with WTP vs. WTA methods?
Framing: Often receive different figures for WTA vs WTP methods
2 problems with WTA and explain them?
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!)
5 disadvantages of CV methods?
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
What key findings have expert evaluations on CV methods found? (3)
1) Closed ended Qs best (open ended -> biased and erratic results)
2) Interview situation should be used
3) Use WTP (not WTA)
see
pages 8 and 9 slides on GATS survey and smoking cessation!!!!!
