Health Technology

Assessment:
Metode Analisis Ekonomi

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Introduction to Health
Economics
Nelly BIONDI ,
South African Centre of Epidemiological Modelling and
Analysis (SACEMA),
Makerere University, 21th July 2009

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 Outline

• What is Health Economics?

• Generic steps in Economic evaluation.

• Types of economic evaluation.

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 Part 1:
What is Health Economics?
The importance of Economic evaluation.
Economists view of the world…

 Pessimist: bottle ½ empty

 Optimist: bottle ½ full
 Economist: bottle ½ WASTED!!

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 The ‘Health Economic’ problem
 Unlimited healthcare “wants”
with rapid growth in health
expenditure.

 Insufficient health sector

resources.

 Choosing between ‘wants’ we

can ‘afford’ given our resource
‘budget’.

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 Concept of opportunity cost
• “ The value of forgone benefit which could be obtained
from a resource in its next-best alternative use”.

Pg ‘A’ Pg ‘B’

Budget

• The aim is to choose activities where benefits outweigh

opportunity cost.

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 What is Health Economics?
 Theoretical framework to help healthcare professionals,
decision-makers or governments to make choices on…

…HOW to maximize the health of population given

constrained health producing resources.

 What health economists need is…

 To understand the relationship between resources used and
health outcomes achieved by alternative options.
 …and compare!

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 Economic evaluation is…
 “ The comparative analysis of alternative courses of
action in terms of both their costs and consequences in
order to assist policy decisions” (Drummond et al,1997)

 Economic evaluation is not “choosing the cheapest”.

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 Economic Evaluation criteria
 Economic evaluation is used to ensure that limited
resources are allocated as efficiently as possible.
 Technical efficiency: meeting a given objective at least cost.
 Allocative efficiency: producing exactly what society wants.

 Society may have other goals when allocating resources:

equity or ethical issues.
 Horizontal equity: ‘equal treatment of equals’.
 Vertical equity: ‘unequal treatment of unequals’.

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 Part 2:

Generic steps in Economic

Evaluation
Stages in economic evaluation

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Deciding upon the study question
 Identifying the problem and aims of evaluation
 What is the problem?
 Why is this problem important?
 What aspects of the problem need to be explained?

 Choosing the alternative options

 Describing the interventions accurately.
 Defining the counterfactual intervention (comparator).

 Defining the audience

 Defining the info needs of the audience.
 Considering how the audience will use the study results.

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Deciding upon the study question
 Defining the perspective of the study
 Patient / Providers / Payers / Healthcare system / Society.
 Choosing a perspective depends on the audience.

 Defining the time frame and analytic horizon

 Analytic horizon > Time frame.

 Choosing the study format

 Prospective / Retrospective / Model.
 Depends on data, time and resources available.

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 Assessment of costs
Overview of costing process:
 Identification of costs
 Cost type: direct vs indirect vs intangible.
 Cost category: programme, patient.
 Organizational level: national, regional, district.
 Input category: capital vs recurrent.
 Intervention activities: planning, administration, media, training.
 Time: start-up vs post-implementation.
 Funding: national govt vs NGO vs donor.

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 Assessment of costs
 Measurement
 Measure in natural physical units (e.g. hours of labour time).
 Fixed, variable and total costs.
 Average versus marginal costs.
 Marginal versus incremental costs.

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 Assessment of costs

Table 1: Number of cases detected & costs of screening with Table 2: Changes in cases detected and in costs of sequential guaiac
sequential guaiac tests tests
Number of Total cases Total costs Average cost per Number of Additional cases Additional costs Marginal cost
tests detected (£) case detected (£) tests detected (£) (additional cost per
1 65.9496 77,511 1,175 additional case
detected (£)
2 71.4424 107,690 1,507
1 65.9496 77,511 1,175
3 71.9003 130,199 1,811 2 5.4956 30,179 5,492
4 71.9385 148,116 2,059 3 0.4580 22,509 49,150
5 71.9417 163,141 2,268 4 0.0382 17,917 469,534
6 71.9420 176,331 2,451 5 0.0032 15,024 4,724,695
(For a population of 10,000, costs include stool tests and barium- 6 0.0003 13,190 47,107,214
enema examinations on those found positive)
From Neuhauser and Lewicki (1975)

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 Assessment of costs
 Valuation
 Market prices (e.g. wage rates) used unless strong belief they do
not reflect opportunity cost (e.g. volunteers).
 Local currencies vs international currencie.
 Adjustments for price inflation.

 Calculation
 Multiply unit of measurement by unit cost (e.g. 2 hours of time at
$5 per hour = $10 labour cost).

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 Assessment of health effects
Overview of the process:
 Identification
 Which outcome measure is employed depends on the objective of
the evaluation.
 This then determines the type of evaluation.

 Measurement
 Measure effectiveness not efficacy.
 Measure (count) in natural physical units.
 Measure final not intermediate outcomes.

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 Assessment of health effects

 Valuation if appropriate
 Value is determined by benefits sacrificed elsewhere (see
opportunity cost again).
 Valuation either in terms of:
 Utility (e.g. QALY, DALY, HYE)
 Money (e.g. WTP)

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 Assessment of health effects
Zoom on the concept of QALY:

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 Adjusting for timing
 Discounting
 Prefer to have benefits now and bear costs in the future – ‘time
preference’
 Rate of time preference is termed ‘discount rate
 To allow for differential timing of costs (and benefits) between
programmes all future costs (and benefits) should be stated in
terms of their present value using discount rate.
 Thus, future costs given less weight than present costs.

 Annuitization of capital costs

 Capital costs represent an investment at start-up in an asset
which is used and depreciated over time.
 Annualise the initial capital outlay over the useful life of asset.

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 Sensitivity analysis
 Process of assessing the robustness of an economic
evaluation by considering the effects of uncertainty.

 Consists in:
 Identifying the (uncertain) variables.
 Specifying the plausible range over which they should vary.
 Recalculating results, usually based on:
 One-way analysis
 Multi-way analysis
 Extreme scenario analysis
 Threshold analysis.

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 Part 3:

Types of Economic Evaluation

 Basic types of economic
evaluation
 Cost minimization Analysis (CMA)
 Cost-effectiveness Analysis (CEA)
 Cost-utility Analysis (CUA)
 Cost-benefit Analysis (CBA)

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 Cost minimization Analysis
 Specific type of analysis in which the outcomes of the 2
(or more) healthcare interventions are assumed equal.

 Therefore economic evaluation is based solely on

comparative costs.

 Result: least cost alternative.

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 Cost-effectiveness Analysis
 In CEA, outcomes are measured in natural or physical
units (e.g. heart attacks avoided, deaths avoided…).

 Only one domain of outcomes can be explored at a

time.

 Result: cost per unit of consequence (e.g. cost/LY

gained)

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 Cost-effectiveness Analysis
 Decision rule:
Two programmes A (comparator) and B.
• If Outcome B = Outcome A => Compare costs (CMA).
• If Outcome B > Outcome A and Cost B < Cost A, B is dominant.
• If Outcome B > Outcome A and Cost B > Cost A, we have to
make a decision.

 In order to make a decision on which intervention to

choose, a cost-effectiveness ratio (CER) should be
calculated.

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 Cost-effectiveness Analysis
 The most commonly CERs used are the:
 Average cost-effectiveness ratio (ACER)
Cost B
ACER=
Effectiveness B
 Incremental cost-effectiveness ratio (ICER)
Cost B−Cost A
ICER=
 Effectiveness B−Effectiveness A 

 The next question is : Is the intervention “cost-effective”?

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 Cost-effectiveness Analysis
 There is no ‘magic’ cut-off number that establishes
whether or not an intervention is ‘cost-effective’.

 It will depend on what is termed the decision maker’s

‘ceiling ratio’.

 The ceiling ratio can be inferred from the amount that

decision-makers are willing to pay.

 To make a decision:
 If ICER of the program ≤ ceiling ratio → adopt the program
 If ICER of the program > ceiling ratio → do not adopt the
program

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 Cost-effectiveness Analysis
 The cost-effectiveness acceptability Plane:

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 Cost-utility Analysis
 In CUA, the outcomes are measured in healthy years,
to which a value has been attached.

 CUA is multidimensional and incorporates

considerations of quality of life as well as quantity of life
using a common unit.

 Result: Cost per unit of consequence (e.g. cost/QALY).

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 Cost-benefit Analysis
 CBA try to value the outcomes in monetary terms, so
as to make them commensurate with the costs.

 Result: Net benefit or cost-benefit ratio.

 CBAs rarely used in health care.

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 Summary
Type of Analysis Costs Consequences Result
Result

Identical in all
Cost Minimisation Money respects.
Least
Least cost
cost alternative.
alternative.

Different magnitude of a Cost

common measure eg.,
Cost per
per unit
unit of
of
Cost Effectiveness Money LY’s gained, blood
consequence
consequence eg.
eg. cost
cost
pressure reduction. per
per LY
LY gained.
gained.
Single or multiple effects Cost
not necessarily common.
Cost per
per unit
unit of
of
Cost Utility Money Valued as “utility” eg.
consequence
consequence eg.eg. cost
cost
QALY per
per QALY.
QALY.

As
As for
for CUA
CUA but
but Net
Net ££
Cost
Cost Benefit
Benefit Money
Money cost:
valued
valued inin money.
money. cost: benefit
benefit ratio.
ratio.

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36
 Background
• Postpartum hemorrhage (PPH) is a leading
cause of maternal death.
• Despite strong evidence showing the efficacy of
oxytocin in preventing PPH, use of the drug for
this purpose remains suboptimal.
• The Uniject injection system prefilled with
oxytocin (OiU) has the potential advantage, due
to its ease of use, to increase oxytocin
coverage rates (OCR).

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 Objectives
• To evaluate the cost-effectiveness of OiU
in Latin America and the Caribbean
(LAC).

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 Methods
• An epidemiological model was built to estimate the
impact of replacing oxytocin in ampoules with OiU on
the incidence of PPH, quality-adjusted life years
(QALYs), and costs, from a health care perspective.
• A systematic search for data on epidemiology and cost
studies was undertaken.
• A consensus panel among LAC experts was performed
to quantify the expected increase in OCR as a
consequence of making OiU available.
• Deterministic and probabilistic sensitivity analyses were
performed.
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 Results (1)
• In the threshold analysis the minimum required
increment in the OCR to make OiU a cost- effective
strategy ranged from 1.3% in Suriname to 15.8% in
Haiti.
• In more than 60% of the countries, the required
increment was below 5%.
• OiU could prevent more than 40,000 PPH episodes
annually in LAC.
• In 27% of the countries, OiU was found to be cost
saving.

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 Results (2)
• In the remaining 22 countries, OiU was
associated with a net cost increment (0.005 to
0.847 2013 US dollars per delivery).
• OiU strategy ranged from being dominant to
having an incremental cost- effectiveness ratio
(ICER) of US$ 8,990 per QALY gained.
• In the great majority of countries these ICERs
were below one GDP per capita.

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 Conclusions
• OiU was cost-saving or very cost-effective in
almost all countries.
• Even if countries can achieve only small
increases in OCR by incorporating OiU, this
strategy could be considered an efficient use of
resources.
• These results were robust in the sensitivity
analysis under a wide range of assumptions
and scenarios.

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