PPHC 10: Health (Health Economics II) – How do we decide what is good value? Flashcards
If markets work well, what do competition and consumer choice solve?
- problems of allocative efficiency – who gets a product or service
- problems of technical efficiency – the most efficient way to convert inputs (raw materials) into outputs (products, services), lowering the price
What is health technology assessment?
process to evaluate health technologies (ie. drugs, devices, diagnostics, etc.) to decide what to provide/fund
Why do we do health technology assessment?
to understand what is best to provide for a population to maximize health
What are the 5 components of a health technology assessment?
- clinical effectiveness – does the technology improve health outcomes relative to other alternatives
- economic evaluation – does the technology provide good value for money (ie. comparing costs and outcomes) relative to other alternatives
- social and ethical impact – how does the technology affect different populations
- organizational impact – how would adopting the technology impact the healthcare delivery, infrastructure, planning
- budget impact analysis – estimating the short-term financial burden on healthcare system
What is economic evaluation?
systematic, comparative analysis of two (or more) courses of action in terms of their costs and consequences
- systematic: a unified framework – what are the relevant components of an analysis, how do they relate to one another, how should the analysis be conducted
- comparative: efficiency – two (or more) alternatives, costs, and consequences – how do we get most output from a govern set of inputs
- courses of action: a particular way of using resources, delivery of healthcare services, programs, policies, etc., assessment required before approval
What are the 3 building blocks of economic evaluation?
- objective
- choice
- costs and consequences
What are the 3 building blocks of economic evaluation in healthcare?
- objective: maximize health for a population
- choice: which policy/program/intervention will most efficiently achieve the objective
- costs and consequences: alternative A or alternative B – what resources are needed (cost), what effects does it generate (benefits or consequences)
What does economic evaluation tell us?
the price tag of an extra unit of effectiveness (however you decide to measure effectiveness)
- ie. $/liter of gas, $/kg of cornflakes
- healthcare benefit isn’t as divisible as gas or cornflakes
What does economic evaluation NOT tell us?
- how much you should be willing to pay – ie. only decision-maker knows that (or we make it up – ie. $50,000 per QALY)
- the budget impact – ie. how many litres of gas you have to buy
What is the objective of economic evaluation?
focuses on value and long-term efficiency – compares the costs and health outcomes of different interventions to determine which provides the best value over the long term
- which intervention is most efficient in terms of health benefits gained per dollar spent
- ie. Canada’s Drug Agency suggests cost-utility analysis, to understand the price tag of getting an extra QALY
What is the objective of budget impact analysis (BIA)?
focuses on immediate financial feasibility – assess the short-term affordability of introducing a new intervention, looking at the financial impact on a specific budget (usually over 1-5 years) without directly assessing long-term health outcomes
- ie. can I afford it
What are the 4 types of economic evaluation?
- cost-minimization analysis
- cost-benefit analysis
- cost-effectiveness analysis
- cost-utility analysis
Cost-Minimization Analysis
- costs
- benefits/effectiveness
- $
- 0 (equivalent)
Cost-Benefit Analysis
- costs
- benefits/effectiveness
- $
- many outcomes (in $)
Cost-Effectiveness Analysis
- costs
- benefits/effectiveness
- $
- 1 outcome (natural units)
Cost-Utility Analysis
- costs
- benefits/effectiveness
- $
- 2 outcomes (quality and length of life)
Cost-Minimization Analysis
What is this analysis?
comparison of cost impact of two different technologies – lower cost is better
cost of new treatment - cost of current treatment
- we effectively ignore the benefit
- does not include qualitative effects – things that might not affect outcomes, but might affect experience
Cost-Minimization Analysis
When is this analysis appropriate?
only when effectiveness between comparators is equivalent
- assumes that there is no difference between interventions – want to be really confident this is the case
Cost-Benefit Analysis
What is this analysis?
net benefit – costs and benefits in monetary terms
net benefit = (benefitA - benefitB) - (costA - costB)
- if net benefit is positive (benefit > cost) – you do it
- if net benefit is negative (benefit < cost) – you don’t do it
Cost-Benefit Analysis
What is the cost-benefit principle?
take an action only if the extra benefits exceed the extra cost
Cost-Benefit Analysis
Why is this analysis rarely used in practice?
it has the most simple decision rules – does the monetary value of the benefit exceed the monetary cost
- how do we measure health benefits in monetary terms
- how much is a year of life worth
- what is health improvement valued at
Cost-Effectiveness Analysis
How is effectiveness measured?
in natural units
- one outcome – ie. cancer screening (number of cases detected), hypertension tablets (average reduction in blood pressure), heart attack treatment (life-years gained)
- costs in dollars ($)
Cost-Effectiveness Analysis
What does this analysis measure?
efficiency – cost per unit of effect achieved
- compare incremental effects gained by one alternative over another against the incremental resources used by one alternative over the other
- reveal at the margin (for the next dollar spent) the extra effects we gain
Cost-Effectiveness Analysis
How is cost-effectiveness calculated?
- incremental cost (ΔC) = CostY – CostX
- incremental effect (ΔE) = EffectY – EffectX
- incremental cost-effectiveness ratio = (CostY – CostX) / (EffectY – EffectX) = ΔC / ΔE
Cost-Effectiveness Analysis
What is the incremental cost-effectiveness ratio (ICER)?
the cost per additional unit of effect
- are the extra units of effectiveness (if any) worth the extra cost
Cost-Effectiveness Analysis
What is the disadvantage of this analysis?
can only tell you about one measure of effect – and that measure of effect might be quite specific
Cost-Utility Analysis
What is the structure of this analysis?
same structure as cost-effectiveness analysis
- some people just call it cost-effectiveness analysis
- subset – uses an outcome measure which incorporates subjective valuation of health
Cost-Utility Analysis
What is the outcome measure?
quality-adjusted life years (QALY)
- length of life (years) x quality of life adjustment (0 = death, 1 = full health)
- subjective valuation (utility) on a 0-1 scale
Cost-Utility Analysis
How is cost-utility calculated?
- incremental cost (ΔC) = CostY – CostX
- incremental effect (ΔE) = Effect_QALYsY – Effect_QALYsX
- incremental cost-effectiveness ratio = (CostY – CostX) / (Effect_QALYsY – Effect_QALYsX) = ΔC / ΔE
Cost-Utility Analysis
What is Canada’s Drug Agency threshold value per QALY?
$50,000 per QALY
ie. if ICER < $50,000 per QALY we should do it
What is budget impact analysis?
analysis of the impact to a single budget from the addition of a new treatment to a centre, government, or individual
- how much more is this going to cost – bottom line impact/financial impact to the decision-maker, relates to cost/incidence/prevalence
- the least explanatory type of economic evaluation – does not take into account benefits or qualitative impact, the least informative but most widely used
- very useful complement to other types of economic evaluation
