Problem: Health over Time
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Transcript Problem: Health over Time
Cost-Effectiveness Problem
You have a $1.5 billion budget to spend
on any combination of these programs:
Per-Patient
# of
Option HBUs Cost (k$) Patients
A
4.0
$750 500
B
3.6
$150 850
C
3.1
$360 1200
D
3.0
$400 290
E
2.9
$300 2000
F
2.9
$650 1000
G
2.8
$230 300
H
2.8
$500 500
Issue: Limited Resources
Assumption: There’s not enough money to
fund every effective treatment (screening
program, etc.)
Goal: Get the most health for our money.
How can we allocate our fixed budget to
provide the most health care?
Answer: Cost-Effectiveness
Determine how much health per dollar
each intervention provides - its “costeffectiveness” and how many of these
interventions are needed
Fund interventions in decreasing order of
cost-effectiveness until the budget is
spent.
Cost-effectiveness
Fund I,B,G,E,C,D, and H for 291 patients:
15,374.8 HBUs (3.06 per 5031 people)
Per-Patient
# of
Option HBUs Cost (k$) Patients
I
2.7
$100 100
B
3.6
$150 850
G
2.8
$230 300
E
2.9
$300 2000
C
3.1
$360 1200
D
3.0
$400 290
H
2.8
$500 500
A
4.0
$750 500
F
2.9
$650 1000
Population
HBUs
Cost (k$) k$/HBU
270
$10,000
37
3060
$127,500
42
840
$69,000
82
5800
$600,000
103
3720
$432,000
116
870
$116,000
133
1400
$250,000
179
2000
$375,000
188
2900
$650,000
224
Effectiveness only
Result: Fund A-D and E for 1498 patients:
13,994.2 HBUs (3.21 per 4338 people)
Per-Patient
# of
Option HBUs Cost (k$) Patients
A
4.0
$750 500
B
3.6
$150 850
C
3.1
$360 1200
D
3.0
$400 290
E
2.9
$300 2000
F
2.9
$650 1000
G
2.8
$230 300
H
2.8
$500 500
I
2.7
$100 100
Population
HBUs
Cost (k$) k$/HBU
2000
$375,000
188
3060
$127,500
42
3720
$432,000
116
870
$116,000
133
5800
$600,000
103
2900
$650,000
224
840
$69,000
82
1400
$250,000
179
270
$10,000
37
Perspective
Patient perspective
Cost to patient (may be 0 due to insurance)
Health to patient
Payer’s perspective
Cost to payer (employer, HMO, insurance)
Health to patient pool
Social perspective
Cost to society, including lost productivity
Health to society
Measuring Costs
Costs are usually measured in dollars,
adjusted for inflation over time.
Costs differ from charges, which include
profits, market effects, etc.
Costs should include future related
medical costs and savings. Future costs
are discounted
Future Costs
Some argue that costs should include all
future costs and savings (wages, etc.) If you
do this:
Life-extending interventions become less costeffective than life-enhancing interventions,
because you’re usually extending low-quality life.
Life-saving interventions become less costeffective in the elderly, who are net consumers,
than in the young, who are net producers.
Benefit, Effectiveness, Utility
Cost-benefit analysis:
Benefit in dollar units
(e.g. willingness to pay for result)
Cost-effectiveness analysis:
Benefit in health units
(e.g. AIDS cases prevented, lives saved)
Cost-utility analysis:
Benefit in utility (quality-of-life) units
(e.g. QALYs)
Measuring Effectiveness
The recommended measure for costeffectiveness is the quality-adjusted life
year, a common unit for comparison.
QALYs = (time in state * utility of state)
1 year of life in perfect health is as good as 2
years of life in 0.5 utility health.
Under $50,000 or $100,000/QALY is
widely regarded as “cost-effective”
Graphing the CE Ratio
CEA problem 2
From Stinnett & Paltiel’s CEA short course
You must choose which of 5 mutually exclusive
programs to fund. You currently fund option A.
Considering your other decisions, you’re willing to
spend up to an additional $200,000 per QALY.
Option Cost (k$) QALYs
A
460
16.4
B
860
17.1
C
1,000
17.9
D
1,260
17.7
E
1,830
18.3
Marginal CEA
(aka Incremental CEA)
What if we have to weigh programs
against each other, or determine if a new
treatment is better to give than the
current standard?
Marginal CEA focuses on how much more
health could we get by spending an
additional amount
CEA Problem 2
Step 1: Order the programs by cost. If some
option costs more and delivers less than another,
eliminate it from consideration.
Option Cost (k$) QALYs
A
460
16.4
B
860
17.1
C
1,000
17.9
D
1,260
17.7
E
1,830
18.3
CEA Problem 2
Step 2: Calculate a marginal CE ratio for each
program, relative to the one above it.
Option Cost (k$)
A
460
B
860
C
1,000
E
1,830
Marginal
QALYs k$/QALY
16.4
17.1
571
17.9
175
18.3
2075
CEA Problem 2
Step 3: Eliminate any program that has a higher
marginal CE ratio than the program below it.
Option Cost (k$)
A
460
B
860
C
1,000
E
1,830
Marginal
QALYs k$/QALY
16.4
17.1
571
17.9
175
18.3
2075
If you’d spend $571k more to get 17.1 more
QALYs, instead spend $175k more to get 17.9.
CEA Problem 2
Step 4: Recalculate marginal CE ratios and choose
the program that has the largest marginal CE ratio
that’s less than the threshold CE ratio ($200,000).
Option Cost (k$)
A
460
C
1,000
E
1,830
Marginal
QALYs k$/QALY
16.4
17.9
360
18.3
2075
In this case, neither C nor E meets our
threshold. We should continue to fund A.
CEA Guidelines
The Panel on Cost-Effectiveness in Health and Medicine (1993)
1. Reference case analysis
Societal perspective (resource allocation)
Compare interventions with status quo
Use QALYs; based utilities on community
preferences, not patient preferences
Use direct and indirect costs, but need not
include unrelated future health and nonhealth costs. Discount costs at 3%.
2. Perform sensitivity analysis
Conclusions
Cost-effectiveness analysis asks how to
spend a fixed budget for the most health
The cost-effectiveness of an intervention
is usually reported as its cost-per-QALY
ratio.
Interventions with lower $/QALY are more
cost-effective and should be preferred to
interventions with higher $/QALY