Transcript Introduction to health economics

Introduction to Health Economics
Matthew Jones – The NIHR Research Design
Service in the East Midlands (NDL)
Objectives
• To give a basic understanding of Economics and Health Economics.
• To outline economic evaluation, and some of the methods used.
• Some basics of what to look for when bids mention Health
Economics.
Economics
Two rules underpin economics:
1) WANTS are infinite
2) RESOURCES are strictly limited
We are forced to choose from amongst our wants the things that we really
want...
Economics
The ECONOMIC PROBLEM is the trade-off that ensues:
1) What is going to be produced?
2) Who is going to produce it? / How is it going to be
produced?
3) Who is going to get it?
ECONOMICS is the study of the choices people (economic agents) make
when reconciling their wants with scarcity of resources.
Opportunity Cost
So we have the economic dilemma:
– Resources are Scarce and Wants are infinite
– Therefore choices have to be made
– Hence, each choice has an attendant “cost”
Every extra unit
of health for A
means one less
unit of health
for B
Health of
Person A
Health of
Person B
What Is Health Economics?
Health Economics is the application of the basic economic principles to
the health care sector.
The purpose of Health Economics is not to stop drugs or treatments
receiving money, but to place the scarce resources of the NHS to the
most optimal and efficient point, called:
“Allocative Efficiency”
Where if any resource is moved, it will lead everyone to be worse off!
What is Economic Evaluation?
“The comparative analysis of alternative courses of action in terms of
both their costs and consequences”
Drummond et al Page 9
We rely upon economic evaluation in instances when:
i) We suffer market failure (i.e. no market or no price)
ii) Market outcomes are not “socially optimal”.
Its ultimate objective is:
EFFICIENCY
Why is Health Economics Important?
It is important for 3 reasons:
1. The size of the contribution of the health sector to the
overall economy.
2. The importance that many people attach to the
economic problems they face in pursuing and
maintaining their health.
3. Decisions about how health care is funded, provided
and distributed are strongly influenced by the economic
environment and constraints.
Its Importance To The DoH
• In 2004, the Department of Health published a document called the
“Standards for Better Health”.
• This document identified 7 important domains where the quality of
Health Care would be measured:
• Safety
• Clinical and Cost Effectiveness
• Governance
• Patient Focus
• Accessible and Responsive Care
• Care Environment and Amenities
• Public Health
• This shows how important Health Economics is becoming, it is
ranked equally to clinical effectiveness.
Its Importance In Bids
• In the recently published review of the first 3 rounds of RfPB
competitions, one of the areas that are important but not
investigated were economic evaluations, and that they were keen to
add these to the RfPB Portfolio.
• The guidelines of the HTA programme identify Cost-Effectiveness
and “Value for Money” as key areas to be considered when applying
for HTA funding.
• The MRC, jointly with NIHR and ESRC, have recently launched a
major drive to encourage further research within the Health
Economics area.
Cost Minimisation Analysis
• Interventions being compared differ in costs but NOT
consequences.
• Costs measured in monetary units.
• Potentially the easiest to undertake.
• But assumption of equality in outcome is highly unlikely.
Cost Benefit Analysis
• Costs and Benefits measured in commensurate units – MONEY
• Interventions can be valued absolutely (do the benefits outweigh the
costs?)
• Potentially the broadest form of evaluation
• Comparable by net gain across all sectors of the economy
• Measurement problems
• Requires human lives to be valued in money terms. Decision
makers may find this unethical.
Cost-Effectiveness Analysis
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Interventions being compared differ in terms of cost AND effect
Costs in Monetary Units
Consequences measured in non-monetary units (Natural Scale)
Consequences should be relevant to level of efficiency (treatment,
health service, societal)
Relatively simple to do
Data is often available
Not comprehensive – the outcome is one-dimensional so cannot
incorporate other important aspects of health care into the outcome
measure
Poor comparability – interventions using different outcome
measures cannot be compared with one another
Cost-Utility Analysis
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Outcome is generic (multi-dimensional)
Encompasses mortality and morbidity (UTILITY)
Used when Quality of Life is important
Combines life years gained with some judgement on the quality of
those life years (e.g. Quality Adjusted Life-Years)
Extends CEA to incorporate quality of life
Enables comparability between health care programmes
Limited to comparability within the health care sector
Difficulties in deriving health benefits
Important Processes in Undertaking an
Economic Evaluation
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Define the question/objective/problem
The perspective of analysis
Identification of relevant costs and benefits
Measurement of relevant costs and benefits
Valuation of relevant costs and benefits
Discounting/Depreciation
Sensitivity Analysis
Define the Question
To decide between alternatives, e.g.
• Clinical strategies for a condition
• Settings for care
• Personnel providing care
• Programmes for different conditions
• Scale and size of programme
• Ways to improve health
The Perspective
• Is the perspective suitable?
• Is it broad enough?
Identification Of Relevant Costs
And Benefits
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Knowing the differences between interventions
What resource use matters?
Collaboration with clinicians
Critical Appraisal: have all the relevant items of resource use been
considered?
• What are the range of benefits resulting from an intervention?
• Who benefits?
Measurement Of Relevant Costs
And Benefits
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Measurement in natural units (days, units, etc)
Resource use data collected as part of trial?
Review patient notes in retrospect?
Literature Review?
Valuation Of Relevant Costs
And Benefits
• Valuation of resource use in monetary units
• Unit costs: cost per unit of resource (Price) – have they used
suitable sources?
• Utility valuation techniques (VAS, SG, TTO, EQ-5D, SF-6D)
• Monetary: WTP vs. WTA
Discounting/Deprecation
• Is capital depreciated? Have they used the appropriate rates?
(NICE)
• Discounting – is it necessary?
Sensitivity Analysis
• Approach used to explore the implications of uncertainty and is used
to test the statistical properties of economic parameters.
• Types include:
– Simple
– Threshold
– Analysis of extremes
– Probabilistic
The End