Week 3 Flashcards
What is economics
Economics and the economy are topics for debate and research
-economists have particular expertise, enabling them to facilitate understanding of and discussion on the topic to conduct research and top advise decision makers
Economics is also a discipline:
-a way of approaching problems
-a characteristic mode of thinking
What is economics about
Concept or problem of scarcity
Resources are limited:
-finite resources
But potential uses of those resources are unbounded
-infinite wants
As individuals and society we face difficult decisions in terms of how we use limited resources
Economics is the study of how decisions are made in the context of scarcity
Economic agents
A central concern in economics is the behaviour of economic agents
Economists make assumptions about what will motivate economic agents and how they’re expected to make decisions
But the central theme running through economics is that decisions will be made in the context of scarcity
economic goods
Any good or service that is scarce relative to our wants for it
-healthcare is an economic good
-not available in endless supply resources are finite but wants for healthcare are unbounded
Opportunity cost
Opportunity cost is the value of the consequences forgone by choosing to deploy resources in one way rather than in their best alternative use
- given a fixed budget for health care increasing production in one speciality will require diverting resources away from another - micro/system level
Positive economics
Is predictive or descriptive
Eg how much does the uk spend on healthcare in comparison to other European countries
Normative economics
Values, judgement and evaluation
Eg the uk government should increase spending on healthcare
Macroeconomics vs microeconomics
Macroeconomics: the economic agent is typically the government or another agent acting on behalf of the government, the objective is typically assumed to be achieving stable economic growth
Microeconomics: the economic agents here are typically consumers and firms
Typically assumed that consumers will seek to maximise their utility subject to time and budget constraints. Various definitions of utility: happiness, satisfaction, desire fulfilment
Typically assumed that firms will seek to maximise profit subject to constraints relating to the inputs of production (land, labour and capital)
Health care funding: how do we collect (and redistribute) the money used to pay for healthcare
Taxation
Private health insurance
Social health insurance
Out of pocket (direct) payments
Mix of all above
Health care budget England
HM treasury: designing the tax system and allocating budgets to other govt. depts
Department of health and social care: policy and oversight of multiple arms length organisation
The opportunity cost of increasing spending on health at this (macro) level is either;
-lower taxes
-increased spending by other government departments
Health care and the free market
Microeconomics tends to assume that there are transactions in a free market:
-consumers buy goods in order to make themselves happy (maximise utility)
-firms seek to make profit selling goods
This can be the case in healthcare Uk
But there are characteristics or both health and healthcare that mean that health care is often considered to be a special case necessitating some form of government intervention (regulation) to correct/prevent market failure
Health care can still be provided by private profit seeking firms even where there is government intervention/regulation and sometimes even when its funded through taxation
Furthermore goods and services that cannot be classified as health care may have an impact on health and the demand for health care
Production in the short run
But in microeconomics the short run is a period of time in which at least one factor of production is fixed
Relating this to health care:
Capital: hospital infrastructure, GP surgeries, MRI scanners, ED beds, ambulances, operating theatres. Not much scope to increase capital in short term
Labour: variable to some extent in the short run:
-may be possible to recruit more support staff
-can bring in health and allied health care professionals from other countries or from private sector
-but long lead time to train health and allied health professionals so labour only fully variable in the longer term
Marginal analysis
Marginal private cost: the change in total cost for the firm/individual associated with producing/consuming one additional unit of a good
Marginal social cost: the change in total cost to society associated with the production/consumption of one additional unit
Marginal private benefit: the change in total benefit (for firm/individual) associated with the production/consumption of one additional unit of a good
Marginal social benefit: the change in total benefit (to society) associated with the production/consumption of one additional unit of a good
Intuition
We wouldn’t expect an individual to continue purchasing more of a good if the cost of an additional unit (marginal cost) exceeds the benefit they’ll get from consuming an additional unit (marginal benefit)
If there’s fixed costs or if there’s economies of scale then marginal cost will fall at first but then begin to increase
Priority setting/ rationing
Most rationing is by price
Where health care is free at the point of use there needs to be some other form of rationing or priority setting
Theres a common assumption in the UK that the purpose of health care system is to maximise population health
So we should prioritise treatments which are most cost effective (gives greatest amount of benefit/outcome for our investment)
No health care system in the world has ever achieved levels of spending sufficient to meet all of the wants of all its clients
Efficiency vs equity
Efficiency: important in both positive and normative economics. The allocation of scarce resources that maximise the achievement of aims -morris
Equity: harder to define, relates more to normative economics, synonymous with fairness and social justice
Potential for conflict: the fairest/most equitable outcome may not be most efficient
Efficiency
Technical efficiency:
-producing output in the best way possible without wasting scarce resources meeting a given objective at least cost
Allocative efficiency:
-producing the pattern of output that best satisfies the pattern of consumers wants/needs
Health economics in the UK
Much of the focus of health economics activity in the UK relates to economic evaluation
Assumes a fixed budget
And some societal objective (typically maximising health but not always)
Comparative in nature (weighs up costs and outcomes)
Seeks to find the most efficient use of resources given the stated objective
Economic evaluation: perspective
In economic evaluation we need to identify relevant costs and outcomes
Depends on the perspective of our analysis:
-health service
-public sector
-patient
-society
Depends on the type of economic evaluation:
-cost effectiveness analysis, cost utility analysis
Clinical outcomes
Advantages:
-often measured as part of clinical study
-easily understood/transparent to clinicians/ decision makers
Limitations:
-lack of comparability across different disease areas
-what does £ per unit reduction in mmhg mean
-what if we have more one outcome
Valuing health: quality adjusted life-years QALYs
Combines length and quality of life ‘utility’ into single unit
Quality of life: value health states with maximum value of 1 (perfect health) and value 0 equivalent to death
Used to weight life years
QALY= sum of(length of life) * (QoL)
Where do we get info from:
-life years: life tables and literature (long term) deaths recorded in study (short term)
-quality of life:
-value judgement
-questionnaires
-direct measurement from health state description
-published values in literature
Euro-QoL EQ-5D
Five dimensions:
-mobility
-self care
-usual activities
-pain/discomfort
-anxiety/depression
Each with 3 levels most recent versions has 5
QALY calculation
QALYs gained: QALYs with treatment- QALYs without treatment
= treatment (QoL * LE)- non treatment (QoL *LE)
Advantages of using QALYs:
-takes into account impact on quality and quantity of life
-common unit of measure that can be used across disease areas
-convenient tools for measurement
Measuring utility
QALYs used in a cost utility analysis
Economic definition of utility: level of satisfaction from goods or services
Utility in cost utility analysis- purely about maximisation of health
Broader outcomes
Patient benefits not captured by QALYs:
-control/empowerment
-reassurance
-knowledge
-satisfaction with care
-capability
Family/carer QoL
Types of cost
Direct cost:
Health and social services resource use. Eg inpatient, outpatient, tests, drugs. UK focus
Non health services resource use eg patient transportation, informal care
Indirect costs:
-wider cost implications to society eg lost production
Health and social services cost
Intervention and usual care costs, related medications
Primary care costs:
-GP and practice nurse visits other health care professionals
Secondary care costs:
-A&E attendance, outpatients, inpatients stays, surgery, tests and investigations
Social services: nursing home care, home help, home adaptations
Patient and carer incurred costs
Cost of time and transport for health care visits
Over the counter medicines and appliances
Private health care
Paid carers
Informal carer time
Indirect costs
Costs due to lost production;
-unable to work due to death or disability
-time off work due to illness
-reduced productivity
Not required for UK analyses
Part of “ reference case” for other countries
Costs: estimation
Measurement of quantities of resource use
Eg from review of case notes, from routine data systems, patient questionnaires
Assignment of unit costs or prices to those quantities
- market prices available for most resource items
Economic evaluation in health care
Definition:
“ the comparative analysis of alternative courses of action in terms of both their costs and their consequences” (Drummond et al 2005)
It involves:
- a comparison of 2 or more alternatives
-examination of both costs and consequences
-takes an incremental approach
Equity in healthcare background
Scarcity and resource allocation is a universal challenge
Health systems/ HTA’s objectives include:
-improving total population health (maximisation) (for a budget/WTP threshold)
-CEA as an ethical principle not the only principle
- reduction of unfair differences in health (inequalities/inequities)
-alternative equity concerns/principles
Economic evaluation is comparative in nature
Key aim: incremental costs (resources) and outcomes
Decision rule of national institute for health and care recommend if treatment/intervention is £20,000-30000 per QALY. Generally explicit but aims for efficiency
Standard CEA methods dont capture health equity impacts (inequalities) of interventions evaluated.
Often don’t explicitly consider distributional impacts of interventions evaluated
Don’t capture the size/nature of trades offs between improving population health and reducing unfair health inequality
Equity
Relates to ‘fairness’ and ‘distributive justice’ in resource allocation decisions
NHS: delivering equal access to healthcare for all
Others system aims: reducing disadvantage, access/use to services and or affordability
health equity
Health equity addresses differences in population health that can be traced to unequal economic and social conditions that are systemic, avoidable and inherently unjust/unfair
Health disparities/health inequities
Preventable health differences between groups of people. These differences can affect how frequently a disease affects a group, how many people get sick or how often a disease causes death
Further understanding of equity
Equity evaluation necessitates assessing equity types across levels and avoidable areas of inequality
Horizontal equity: the equal treatment (use of healthcare resources) of people who are equal in a relevant respect (equal need).
- individuals with the same need for health care have the same use for healthcare (variations investigated for age, gender, status, ethnicity)
Vertical equity: the unequal treatment (use of healthcare resources) of people are unequal in a relevant aspect (unequal cases)
-individuals with different levels of ill health have different levels of use
When is CEA not enough
Adding equity to economic evaluation imposes a cost
Impact of policy decisions in distribution of costs and benefits on equity relevant variables such as socio-economic status, ethnicity, area of residence, gender, age, severity of illness, geographical location
Special cases where a trade off might be required eg rare diseases (orphan drugs), dreaded disease (eg cancer, end of life)
Population wide- screening, public health interventions not adequately accounted for in CEA
CEA equity trade offs
CEA- absolute size of population health gains
Equity- how these health gains are distributed in the population
Eg HIV treatment interventions:
-CEA- universal screen and early treatment
- equity- prioritise severely ill, financial protection
The health equity impact plane
Cost effectiveness (net total health impact)
Net health equity impact
Win-lose: cost effective- harms equity
Win-win: cost effective, improves equity
Lose-lose: cost ineffective, harms equity
Lose-win: cost ineffective, improves equity
Equity considerations and EE
Equity weighting- (eg health outcomes) relative weight of principles
-extent to which society scarifies health gains
Subgroup analysis of groups/patients
-different valuation of outcomes to assess impact of inequality or group
Equity weighting analysis
How much concern for equity is required to choose a fairer but less cost-effective option
Reflect extent to which society is prepared to sacrifice overall health benefits for equity (trade offs with efficiency)
Equity weighting
Numbers expressing relative weight of equity principles
NICE reference case is no weighting (exceptions- ‘life extending treatment at the end of life)
Sources of equity weights:
-views of the population (surveys/experiments)
- views of decision makers( surveys/past decisions)
Subgroup analysis
EE of interventions could be reported by different subgroups/patient types
Apply a different valuation (eg equity weighting) of outcomes for each socioeconomic position to assess impact on health inequality or patient group
Tabulation of updated results
Equity considerations in NICE framework
NICE methodology offers framework for incorporating social and ethical values for funding interventions above the threshold
NICE recognises that society and patients have valid claims to resources over and above cost effectiveness evidence
Special considerations have been made
NICE- CEA of health technology assessments
CEA criteria in conventional health technology assessments HTAs treatments recommend routine use if ICER <£20000-£30000
Exceptions/alterations have included:
-end of life care
-ultra orphan drugs (HST)
-cancer drug fund (CDF)
End of life care
Criteria introduced in 2009 for costly end of life technologies
Aim to provide special consideration for life extending treatments at the end of life with very short life expectancy
Ethical and social importance of being compassionate towards of dying
By weighting QALYs (2.5 from £20000)- £50000, with <24 months and life extending to 3 months
61 single technology appraisals were found to meet the EoL criteria
cancer drugs fund CDF
Provide short term solutions to reduce delays and improve patient access to novel treatments
Designed to increase public access to cancer treatments with clinical uncertainty/promising
Ideally between £20-£30000 but with uncertainty
Some have questioned fairness of the NHS in choosing cancer compared to all other patients
Other:
-empirical analyses outside CEAs often assess inequalities between groups
-case study: based on access to healthcare
-access to healthcare for men and women with disabilities in the UK: secondary analysis of cross -sectional data 2017
CDF aim etc
Aim: to investigate differences in access to healthcare
Hypothesis: 1) people with disabilities likely to have unmet care needs. 2) women more likely to report unmet needs
Setting/data: secondary data from European health interview survey
Key results: 1) severe disability associated with higher odds of unmet needs (mental healthcare and prescribed medication) 2) more likely with women than men
Policy implications
Study revealed inequalities in access to healthcare services (disabled/women)
Barriers were in terms of transportation, prescriptions costs and long waiting lists
Similar funding observed in UK and other settings- particularly with cancer services
‘Rationing’, ‘priority setting’ and ‘managing scarcity’ terms
Used “to refer to the ways in which healthcare interventions are restricted in order to control spending or increase efficiency” (Williams, Robinson and Dickinson 2011, p6)
Why ration pressures
Shifts in:
-demography: people live longer
-pattern of disease
-medical technology : increase faster than household income
- staffing, service organisation: sub specialisation, minimum staffing rules, system reorganisation
-expectations and culture: population ageing, professional expectations, new knowledge and technology, patient expectations
Implicit rationing
Not acknowledged
Examples:
- delay (waiting lists)
- deterrence
-dilution (spending less time on patients)
-denial (deny treatment based on eligibility)
Explicit rationing
A) political methods:
-discussion and consensus building (eg conferences, surveys, voting)
-clinicians or the public?
B) technical methods:
-cost effectiveness
-other methods
How the NHS in England rationed (prior to integrated care systems in 2022)
1) three year cash limited budget determined in parliament
2) DH allocates (most of) the budget to NHS England
3) NHS England allocates 75% to CCGs
4) NHSE and CCGs allocate the budget to GPs and trusts
5) trusts and GPs allocate the budget to specialities, treatments and patients
6) doctors tailor treatments to patients
What is NICE
The national institute for Health and care excellence is the independent organisation responsible for providing national guidance on the promotion of good health and the prevention and treatment of ill health
Rationale for NICE
“Underachievement of the health service”
-unacceptable variations
-poor uptake of effective practice
-excess use of inappropriate treatments
-continued use of ineffective treatments
The NICE guidelines
Guidelines: clinical guidelines, public health guidelines, social care guidelines
Health technology evaluation: technology appraisals incl HST, interventional procedures, devices and diagnostics
Quality: quality standards, quality indicators
The committee’s dilemma (at every appraisal)
1) what is the value of the (new) technology to patients?- clinical effectiveness
2) what is the consequences of adoption of the technology for all patients?- cost effectiveness
3) is our consequent decision fair and reasonable
Explicit criteria for decision making
ICER= incremental cost effectiveness ratio
- ICER <20K/QALY: usually accept, unless poor evidence
-ICER £20-30k/ QALY: judgement is made taking into account:
— the degree of certainty around the ICER
— whether health required quality of life was adequately measured
— the innovative nature of the technology
— non health objectives
- ICER>30k/QALY: usually reject, unless strong arguments with respect to above criteria
Some ICERS
Cost per QALY less than £3000:
-neurosurgery- benign brain tumours
-laser treatment for DM retinopathy
-folic acid fortification of cereal grain products (D)
Cost per QALY £3000 to £30000:
-CABG (coronary artery bypass surgery) for left main vessel disease
-neonatal ITU for very low birth weight
-haemodialysis
Cost per QALY >£30000:
-inpatient detoxification for drug abuse
-pre-op HIV screening
-many new anti-cancer drugs eg Sunitinib RCC
More harm than good:
- PSA screening
- Antiarrhythmics after MI
Special considerations ICERS
1) end of life timespan (eg temozolomide)
2) children (eg CSII)
3) significant innovation (eg imatinib)
4) disadvantaged populations (eg pemetrexed)
5) search for sub groups (eg omalizumab)
6) avoiding exclusions/small numbers (eg HGH)
7) severity/cancer
8) primary prevention (eg statins)
What is economic evaluation
A comparative analysis of alternative courses of action in terms of both costs and consequences
-often an intervention (something new)
-and a comparator (usual care)
Types of economic evaluation
Most types of economic evaluation quantify costs in monetary units
-the possible exception being cost consequence analysis
But differ in terms of how outcomes (benefits) are included/quantified/ summarised
Cost-minimisation analysis (CMA)
Don’t use CMA: not a full from of economic evaluation
-requires an assumption that there are equivalent outcomes from the different treatments (intervention and comparator)
-unless you actually measure outcomes, you wont know they’re equivalent
-if you assume outcomes are equivalent then CMA simply involves identifying the cheapest option
Cost consequence analysis CCA
Costs and outcomes are listed without an attempt to fully aggregate either costs or outcomes
Could be listed in a largely qualitative way
It’s then left to the decision maker to “weigh up” the list of costs and the list of outcomes and decide whether to fund the new intervention or not
Cost benefit analysis CBA
Costs quantified in monetary units
Outcomes (benefit) also expressed in monetary units
Eg. The cost of providing intervention A= £500
The benefit to society is valued at £1000
So we should fund intervention A as it produces a net benefit (it does more good than harm)
Cost effectiveness analysis CEA
Costs expressed in monetary units
Outcomes expressed in single, natural units (only relevant to a particular context)
- eg number of asthma attacks prevented
- eg weight loss
-eg reduction in the number of PTs with high blood pressure
Report cost per additional unit of benefit
Can inform technical efficiency not allocative efficiency
Cost utility analysis CUA
Costs expressed in monetary units
Outcomes expressed as quality adjusted life years (QALYs) eg, from EQ-5D. So can be applied to multiple scenarios. Aggregated summary of health benefit compares QOL and length of life
Report cost per additional QALY gained
Can inform allocative efficiency
Most common form in healthcare context
Incremental cost effectiveness ratio ICER
ICER= difference in costs/ differences in outcomes
Cost of B (intervention)- cost of A (comparator)
QALY gain associated with B- QALY gain associated with A
£1000- £500= £500 (this is the difference in costs)
0.75-0.55= 0.20 (this is the difference in outcomes)
ICER= 500/0.20 =£2500 (the cost per additional QALY gained)
Decision rule (CUA)
National institute for health and care excellence (NICE)
Consider a new therapy to be cost effective if the cost per QALY is less than £20000 per QALY
£20000 to £30000 is an area that will be considered taking other factors about uncertainty into account
Concerns about QALYS
Whose values?
Insensitivity of questionnaires
End of life treatments
Discrimination
Broader patient benefits
Family/carer benefits
