Overview of the day
1015-1100 Introduction to Health Economics
1100-1200 Introduction to Economic Evaluations
1200-1300 LUNCH
1300-1400 Appraising Economic Evaluations practical
1400-1430 Prioritisation and Resource Allocation
1430-1530 Practical
Introduction to Health
Economics
Dr Carol Chatt
Dr Arun Ahluwalia
Learning Outcomes
• Gain a general understanding of health
economics
• Be aware of different types of economic
evaluation
• Be able to critically appraise an economic
evaluation
• Gain an understanding and experience of
prioritisation & resource allocation
What do you think?
• The over-riding duty of a doctor is to ensure
the best possible outcome for their patient
…and cost should not be a factor
• The patient should not be concerned about
the cost of treatment being given to them
• Life-saving interventions are preferable to
those that improve the quality of life
The NHS context
• The NHS has limited resources
Although spending has increased!
The NHS context
• The public have increasing expectations
Source:
HES Data
The NHS context
• We need to decide what
we can afford with our
limited budget
• Health Economics is
about choice
• But for every choice
there is an ‘opportunity
cost’
Key Concept – Opportunity Cost
• “The value of foregone benefit which could be
obtained from a resource in its best
alternative use
• E.g. if you have a holiday and you take a 2
week cruise…you forego the opportunity of
going skiing
• In the NHS, how do we choose which
treatments to provide?
 Economic evaluation
Economic Evaluation
• “The comparative analysis of alternative course
of action in terms of both their costs and
consequences in order to assist policy decisions”
(Drummond & McGuire, 2001)
• This does not just mean always choosing the
cheapest options
• We must also consider the consequences (or
outcomes) of each option, including equity
Key Concept: Equity
• “A system of justice based on conscience and
fairness”
• Equality is giving everyone the same share
• Equity is giving everyone a share according to
their need
– Horizontal equity – Equal treatment of equals
– Vertical equity – Unequal treatment of unequals
Economic Evaluation components
• Costs
Narrow costing perspective
– To the NHS
– To the whole public sector (e.g. social services)
– To the patient (e.g. time off work, transport to
appointments, etc)
Wider costing perspective
– (Resources saved)
• Consequences
– Health state change
– Other gains e.g. employment
Types of evaluation
Types of Economic Evaluation
1.
2.
3.
4.
5.
CMA
CCA*
CBA
CEA
CUA
Cost-Minimisation Analysis
Cost-Consequence Analysis*
Cost-Benefit Analysis
Cost-Effectiveness Evaluation
Cost-Utility Analysis
*not considered by some to be a true economic evaluation
1
Cost-Minimisation Analysis
• Requires evidence that outcomes are
equivalent
• Cheapest option is preferable
• Simvastatin and Atorvastatin lead to similar
cholesterol reductions
– Simvastatin 40mg costs £1.17 per month
– Atorvastatin 20mg costs £24.64 per month
2
Cost-Consequence Analysis
• Costs and consequences are reported
separately
• Costs and consequences not aggregated into
single measures
• Needs interpretation – may be influenced by
personal judgment
3
Cost-Benefit Evaluation
• Costs and consequences measured in terms of money
• If sum of consequences is greater than cost,
treatment is acceptable
• Methodologically can be difficult accurately assigning
monetary values
– What is the monetary value of an extra 6 months of life?
• Also need to consider problems of a fixed budget
• E.g. Triptan drug costs £4 per migraine, saved £12.50
in work absences
3
Cost-Benefit Analysis cont.
4
Cost-Effectiveness Analysis
• Outcomes measures in ‘natural units’
– E.g. years of life saved, symptom-free days,
number of cases detected
• Difficult to compare interventions that are
measured in different units
4
Cost-Effectiveness Analysis cont.
5
Cost-Utility Analysis
• Consequences presented as a single generic
measure (e.g. Quality Adjusted Life Year, QALY)
• Similar to CEA but now able to compare
consequences of treatments with different
outcomes, e.g. life-saving treatments can be
compared to life-improving treatments
• Which intervention has a better Cost-Utility
outcome?
£1100 per QALY gained
– Hip replacement
– Coronary Artery Bypass Graft £2000 per QALY gained
QALYs
• Combines:
– Quality of Life (QoL)
– Length of Life
• Measuring QoL:
– Can use HRQoL
questionnaire e.g. EQ-5D
– Or a direct valuation
• Visual Analogue Scale
• Standard Gamble
• Time Trade Off
EQ-5D
• Example results for 5 patients using EQ-5D
Patient
A
B
C
D
E
Mobility
1
1
2
3
5
Self-Care
1
2
2
4
5
Usual Activities
1
2
3
4
5
Pain or discomfort
1
2
3
4
5
Anxiety or depression
1
2
3
4
5
QoL Score
1.00 0.65 0.55 0.06 -0.59
QoL 1 = perfect health
QoL 0 equivalent to death
QoL <0 = worse than
death
Standard Gamble
• The respondent chooses between two
alternatives with two possible outcomes: a
good outcome with the probability p and a
bad outcome with the probability of 1-p
• The probability of outcomes is varied until the
respondent is indifferent about the two
alternatives (Columbia University, 2012)
Standard Gamble example
• You are paraplegic (can’t walk), and offered a
treatment which has:
– 70% chance of perfect recovery for 30 years…then
death (BUT a 30% chance of instant death)
or
– Remain in your current
health state for 30 years
…then death
Standard Gamble example
• How about:
– 80% chance of recovery with 20% chance of death
– Or remain as you are
Time Trade-Off
• The respondent is asked to choose between 2
alternatives, e.g.
• 30 years as a person with paraplegia
or
• 28 years of perfect health
• 30 years as a person with paraplegia
or
• 20 years of perfect health
QALYs
• QALY = Σ (QoL × Length of time in that state)
• 1 QALY is one year of perfect health
• Calculating QALYs mini-practical
Advantages of QALYs
• A convenient non-monetary unit
• Can compare life-extending / life-improving /
life-saving interventions
Disadvantages of QALYs
• Only considers outcome of patient
– Ignores effects on family, society, etc
– Only measures health-related effects
• Assumes that the value of the health state is
independent of the duration
– Humans adapt!
• Elicitation method
– Sensitivity of EQ-5D is a separate issue
– Valuation depends on who is asked (Dr > public >
If you reject QALYs
patients)
• Inherently ageist
what do you use
instead?
How to present your CEA and CUA
results (1)
• What is the difference in costs and the difference
in consequences of a new treatment compared to
the current treatment?
• The incremental cost-effectiveness ratio (ICER) is:
ICER =
Difference in costs_______
Difference in consequences
• This calculates the cost per extra unit of benefit
How to present CEA and CUA results (2)
• The cost-effectiveness plane
Difference in cost
NW
NE
Difference in
effectiveness
Current
treatment
SW
SE
“North West never invest…
South East always invest”
Difference in cost
NW
NE
New treatment is
more expensive and
less effective
Difference in
effectiveness
New treatment is
less expensive and
more effective
SW
SE
The North East quadrant – A or B ?
Difference in cost
NE
NW
Ceiling Ratio – this is an arbitrary upper
limit on what ‘we’ are willing to pay
NICE set this at about £20,000 to £30,000
per QALY
SW
A
B
Difference in
effectiveness
SE
South West quadrant – C or D ?
Difference in cost
NE
NW
Difference in
effectiveness
C
D
SW
SE
The cost-effectiveness plane
Difference in cost
NW
NNE
Current dominates
alternative
ENE
Alternative is
cost-effective
WSW
Current is not
cost-effective
SSW
Alternative
dominates current
SE
Difference in
effectiveness
References
• Barton P (2012). Lecture: Economic Evaluation in Health Care: an
Introduction.
• Columbia University (2012).
http://people.dbmi.columbia.edu/~cmr7001/sdm/html/methods.ht
m [accessed 31/08/2012)
• Drummond M & McGuire A (2001). Economic Evaluation in Health
Care. Oxford: Oxford University Press.
• EQ-5D (2012). http://www.euroqol.org/news-list/article/interimscoring-for-the-eq-5d-5l-eq-5d-5l-crosswalk-index-valuecalculator.html [accessed 31/08/2012]
• Maheswaran H (2003). Lecture: WM Masterclass.
• Wells NE, Steiner TJ (2001). Effectiveness of eletriptan in reducing
time loss caused by migraine attacks. Pharmacoeconomics
2001;18:557–66.