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Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
Health economics
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Health economics
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Health economics

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  • This definition does not restrict economics to any one kind of human activity: it applies to allactivities where scarcity exists and there is thus a need for making choices. Indeed, economics isoften described as the study of scarcity and choice.The emphasis of the above quotation is on describing and analysing decisions to do with scarcity andchoice. This area of economics is called positive economics and it is concerned with 'what is', or'was', or 'will be'. In addition, normative economics attempts to determine what 'should be', notmerely 'what is'. Normative economics thus has to make judgements about the norms, or standards tobe applied and disagreement over normative statements cannot easily be settled by empiricalobservation.
  • The scarcity of resources (not in the sense of ‘rarity’ but in the sense of resource availabilityrelative to demand)Resources here doesnot means only the money but also people,materials,and time which could have been put to some other useEconomics applies to all activities where scarcity and choice exist (Lee and Mills,1983a). Health is no exception to that.
  • It can, broadly, be defined as ‘the application of the theories, concepts and techniques of economics to the health sector’ (Lee and Mills, 1983a). It is, thus, concerned with such matters as the allocation of resources between various health promoting activities, the quantity of resources used in health services delivery; the organization and funding of health service institutions, the efficiency with which resources are allocated and used for healthpurposes, and the effects of preventive, curative and rehabilitative health services on individuals andsociety (Lee and Mills, 1979).Health economics is the study of how scarce resources are allocated among alternative uses for the care of sickness and the promotion, maintenance and improvement of health, including the study of how health care and health-related services, their costs and benefits, and health itself are distributed among individuals and groups in societyEconomicaspects of relationship between health status and productivity, financial aspects of health careservices, economic decision making in health and medical care institutions, planning of healthdevelopment and such other related aspects are the major areas covered under health economics.
  • Health economics lies at the interface of economics and medicine and applies the discipline of economics to the topic of health
  • Imperfect and assymetric information- consumers often do not know what type of care will generate greatest improvements in their health status and must rely on the providers to advise themConflict of interest= particularly if the provider/ physiciam income is directly linked to the amount of treatment providedAnother important condition for markets to be optimal is that consumers should have full information about the product- not just price but its effectiveness, and appropiateness and be able to use it to plan consumption decisions according to their preferences.
  • how ever in helath care , there is Restriction on new entrants exist in the form of control by professional association.One of the pre-condition for a perfectly competitive market is that there should be free entry into the market.so consumers are then paying no more than is absolutely necessary to cover the cost of production
  • It is not strictly necessary to have an equal initial distribution of assets for free markets However, given our social nature and caring eternalities, thereIn a pure market system the market distributes output based on demand.In this type of system, the individuals without sufficient income face a financial barrier to get the goods and services.Equity is the main reason why government fund and manage actvities in the health sector
  • Markets work best when all the costs and benefits of a product are taken into account in the setting of its price. In such situation market is said to be “complete” marketMarkets is said to complete if the costs and benefits of the consuming or producing the particular goods is restricted to those engaged in trading. However in health care , it is not always case.
  • Combined with fixed costs, variable costs make up the total cost of production. While the total variable cost changes with increased production, the total fixed costsstays the same
  • Average cost: the cost per unit of output. Each of the threecost concepts discussed above can be expressed as an averagecost: average fixed costs, average variable costs and averagetotal costs, by dividing cost by the measure of output (patientDays, hospital admissions, diagnostic tests performed, etc).
  • While considering health problems, costs may be differentiated as follows
  • Capital cost: cost for setting up the servicesOverhead cost: cost for running services egelctricity, heating cleaningFixed costs: the costs associated with operating a particularprogramme or intervention that do not vary with the scale ofprovision such as the number of patients treated or thenumber of tests performedVariable cost: the cost associated with a programme or interventionthat varies with the size of the programme or thenumber of patients treated with the intervention.Variable cost: the cost associated with a programme or interventionthat varies with the size of the programme or thenumber of patients treated with the intervention.Marginal cost: the additional cost associated with producingone more unit of output. As pointed out earlier, in consideringthe optimal level of service provision, it is this cost conceptthat is crucial in economics.
  • For chronic health states, people are asked to choose between the certainty of the specified health state for a given period of time or a gamble that involves a probability (p) of restoration to full health and a complementaryprobability (1-p) of immediate death. The value of p ischanged until the respondent regards the two options asequivalent to each other. The utility of the specified healthstate is then given by p. A slightly modified method is neededfor temporary health states24 or states regarded as worse thandeath.
  • Time trade off: an alternative, and supposedly simpler,approach to establishing health utilities. Here, the respondentfaces a choice between living for a given period of time (t) inthe specified health state or a shorter period of time (x) in fullhealth. The duration in full health is altered until therespondent regards the two options as equivalent to eachother. The value of the health state is then given by (x/t). Aswith the standard gamble technique, the method describedhere needs to be adjusted for short-term conditions.
  • Quality adjusted life years (QALYs): a summary measure ofhealth gain that combines (changes in) life expectancy andquality of life. It uses health utilities to weight improvements inlife expectancy according to the quality of life experienced.Thus, a given state of health (say living with chronic pain)may be assigned a utility of (say) 0.75. Living for 20 years inthis state of health would then be considered equivalent to 15QALYs (20´0.75) and an intervention that prevented peoplefrom entering this state would lead to a health gain of fiveQALYs.
  • Quality of life index1.0=normal health0.0=death
  • Time-Trade-Off (TTO) is a tool used in health economics to help determine the quality of life of a patient or group. The individual will be presented with a set of directions such as:Imagine that you are told that you have 10 years left to live. In connection with this you are also told that you can choose to live these 10 years in your current health state or that you can choose to give up some life years to live for a shorter period in full health. Indicate with a cross on the line the number of years in full health that you think is of equal value to 10 years in your current health state.The SF-36 is a measure of health status and is commonly used in health economics as a variable in the quality-adjusted life year calculation to determine the cost-effectiveness of a health treatmentEQ-5D is a standardised measure of health status developed by the EuroQol Group in order to provide a simple, generic measure of health for clinical and economic appraisal.[1] Applicable to a wide range of health conditions and treatments, it provides a simple descriptive profile and a single index value for health status that can be used in the clinical and economic evaluation of health care as well as in population health surveys.Standard gamble (SG): Respondents are asked to choose between remaining in a state of ill health for a period of time, or choosing a medical intervention which has a chance of either restoring them to perfect health, or killing them.(VAS): Respondents are asked to rate a state of ill health on a scale from 0 to 100, with 0 representing death and 100 representing perfect health. This method has the advantage of being the easiest to ask, but is the most subjective.
  • Weightfator reflects the severity of the condition on scale from 0=full health to 1 deadYLL= no of death at age x global standard life expectancy at that ageYLD= no of incident cases at age x average duration of condition for each age of incidence x disability weight factor
  • Contingent valuation: is a method of valuing the benefits ofhealth services based on estimates of the maximum amountthat people would be willing to pay for the availability of aservice or the minimum amount that they would accept ascompensation for not having the service available.25
  • CMA-it compaes two or more options that achieve the same effect. Looks for lowest cost for existing service provision (no benefits considered
  • Ie the final cost effectiveness ratio tells how one option compares with another but doesnot tell whether the strategy is worth pursuing in an absolute sense
  • Other methods include using market values of risk or asking individuals to put monetary values on different health states using a willingness-to-pay approach. Willingness to pay refers to compensation paid by the respondent, either for obtaining an improvement in their health or not having their health deteriorate. Willingness to accept refers to compensation paid to the respondent, either for having their health deteriorate or not obtaining an improvement in their health.Human capital approaches: no of deaths averted * expected average life span * average yearly earning plus ( no of disabled life years avoided “* estimated financial losses which would have been incurred per year
  • Other methods include using market values of risk or asking individuals to put monetary values on different health states using a willingness-to-pay approach. Willingness to pay refers to compensation paid by the respondent, either for obtaining an improvement in their health or not having their health deteriorate. Willingness to accept refers to compensation paid to the respondent, either for having their health deteriorate or not obtaining an improvement in their health.Human capital approaches: no of deaths averted * expected average life span * average yearly earning plus ( no of disabled life years avoided “* estimated financial losses which would have been incurred per yearConjoint analysis: a method of “estimating the relative importance of different aspects of (health) care, the trade-offs between these aspects, and the total satisfaction or utility that respondents derive from health care services”.27 The most common method entails asking respondents to choose between a series of paired descriptions of alternative service configurations, from which the importance of the different attributes of each service can be estimated. The technique is now referred to as discrete choice experimentation
  • DALY gained=(deaths averted x discoiunted average number of life years lost by 1 death) + ( case morbidity rate x probability of contracting disease x number treated x efficacy x lenth weighting x disability weighting)
  • That figure is very powerful in showing in that situation how much health benefit can be obtained for a given investment realtive to other possible strategies.Marginal cost and benefit: related to epidemiology of local disease, geographical characteristics of service infrastructure etc. egprograme may be cost efeective but while expanding it might not be if sufferer are living in the remote area, thinnlydistributted. Like if coverage is already high and then expansion will be expensive The marginal cost/benefit is the change in cost/benefit arising from (strictly a one unit) increase ordecrease in service provision. Affordability: no point recommending the expansion of a service if the money is simple not available to fund it. If public funded than think about cost for running program in eligible population, proportion of them likely to attend multiplied by estiamted cost per person compared with resource available. If the user has to pay then think about how likely proce of the service compares with household disposable income or curent expenditure on healthFlexibility: Reccommendation should take account into the degree of flexibilty which manager have over resource use and transferHealth service capacity: Are necessary human and physical resources availabl? How will staff react the new procedure?
  • Patient attitude: Issues of acceptability of services to patients are also important as these will influence utilization and hence the extent to which benefits are realized.Connecting different options:simplereccommendation to increase or decrease a service may be less useful than presenting the implications of a decision on a range of connected services. Economic evaluation are costly to carry out. It is therefore important for decision makers to know that how generalisation of result can be done.Opportunity cost: What activity will not be funded if this programme is funded? Alternatively, what additional services can be provided of we cut back this programme?
  • The second Nepal Health Sector Programme (NHSP-2) 2010-15 projects that the share oftotal government budget for health will rise from around 7% (medium case) in 2010/10 to 9.6% in2014/15 (high case). The achieved figure in 2010-11 is 7.05% of total budge. Rs 24.51 billion allocated; expansion of free of cost maternity service; free basic health services; promotion of infant and maternal health2011/2012- 27.12billions health budget-8.6%311.9billion
  • Transcript

    • 1. Dr Dipesh Tamrakar Junior Resident SPH & CM
    • 2.   Health Economics- introduction - Economics -Importance of economics on health - health economics - how health care market is different Economic Evaluation - Definition -Concepts of cost -Valuing outcome -Methods
    • 3.  “Economics is the study of how people and society end up choosing, with or without the use of money, to employ scarce productive resources that could have alternative uses, to produce various commodities and distribute them for consumption, now or in the future, among various persons and groups in the society. It analyses the costs and benefits of improving patterns of allocation of resources “(Samuelson, 1976)
    • 4.   Macro Economics: deals with the behavior of economy as a whole( Growth rate, level of employment) Micro Economics: deals with individual players in the field, such person, hospitals, firms etc
    • 5.   Demand for health activities are unlimited Resources , in contrast, are always scarce in supply. so have to choose which resources to use for which activities
    • 6. broadly, defined as „the application of the theories, concepts and techniques of economics to the health sector‟  concerned with matters : -the allocation of resources between various health promoting activities, -the quantity of resources used in health services delivery; -the efficiency with which resources are allocated and used for health purposes, and -the effects of preventive, curative and rehabilitative health services on individuals and society 
    • 7. Health Economics Health Economics
    • 8.   Presence and extent of uncertainty Uncertainty in demand – consumers are uncertain about their health status and need for health care in coming days – means demand for health care is irregular.
    • 9.    Problems of information Sometimes information is unavailable to all parties (consumers and providers) concerned. For example neither gynecologists nor their patients may recognize the early stages of cervical cancer without a pap smear. At other times, the information in question is known to some parties(providers) but not to all(consumers) – information asymmetry a problem – the provider offers both the information and the service, leading to the possibility of conflicting interests.
    • 10.  Lack of competition  Licensure requirements for providers  Restrictions in producing health manpower  Regulation to promote quality
    • 11.    Role of equity In a pure market system the market distributes output based on demand however, given our social nature and caring externalities , there raises the voice of equity (fairness) in health sector because of correlation between poverty and ill health
    • 12.     incomplete market Markets is said to complete if the costs and benefits of the consuming or producing the particular goods is restricted to those engaged in trading. However in health care , it is not always case. Positive externalities: vaccination, planting forest Negative externalities: passive smoking, air pollution
    • 13.   The identification, measure and comparison of the costs(resourced consumed) and outcomes(clinical, economic and humanistic) of intervention It is multidisciplinary and involves economics, epidemiology, biostatistics, medicine, pharmacy etc
    • 14. Cost is the value of resources used to produce something, including specific health services. Types of Cost:  Fixed cost: the costs associated with operating a  particular programme or intervention that do not vary with the scale of provision such as the number of patients treated or the number of tests performed, Eg rent, property tax, insurance, cost of setting clinics.  Variable cost: the cost associated with a programme or intervention that varies with the size of the programme or the number of patients treated with the intervention. Eg drugs, blood products
    • 15.   Total costs : the sum of all the fixed and variable costs associated with a particular scale of provision of a programme or intervention. The greater the scale of provision, the larger will be the total costs. Average cost: the cost per unit of output. Each of the three cost concepts discussed above can be expressed as an average cost: average fixed costs, average variable costs and average total costs, by dividing cost by the measure of output (patient Days, hospital admissions, diagnostic tests performed, etc).
    • 16.    Marginal cost is the cost of producing one extra unit. marginal cost = the change in total costs Opportunity cost: The cost of passing up the next best choice when making a decision. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used for
    • 17.  Direct Costs   direct health care costs direct non-health care costs  Indirect Costs  Intangible costs:
    • 18.  Direct Costs represent the value of  all goods, services ,other resources ,consumed in providing health care  direct health care costs  include costs of physician services, hospital services, drugs, etc. involved in delivery of health care  direct non-health care costs  are incurred in connection with health care, such as for care provided by family members and transportation to and from the site of care.
    • 19.  Indirect Costs. "productivity losses."  include the costs of lost work due to absenteeism or early retirement, impaired productivity at work, and lost or impaired leisure activity.  include the costs of premature mortality   Intangible cost: non-financial costs such as anxiety, pain or depression, which the patient has to face due to sickness
    • 20.      Health utility: a measure of strength of preference that people have for particular health states. 1: a year of full health 0:death(extremely bad health) Health states that lie somewhere between these two anchor points will have a utility value that lies somewhere between zero and one. Assessment done with TTO, SG , VAS
    • 21.  -  Standard gamble: a method of establishing the utility of a specified health state.( chronic Disease) P = Probability of restoration to full health 1-p= complementary probability of immediate death The utility of the specified health state is then given by p
    • 22.  - Time trade off: an alternative approach to establishing health utilities Given period of time in chronic condition = t Shorten period of time in full health= x The value of the health state is then given by (x/t).
    • 23.    a summary measure of health gain that combines (changes in) life expectancy and quality of remaining life years. It uses health utilities to weight improvements in life expectancy according to the quality of life experienced Definition:” Number of years at full health that would be valued equivalently to the number of life years as experienced”
    • 24.    Suppose, dialysis treatment extends life by 15 years. If individuals valued the first 10 years at 0.75 on the scale of zero to one and last 5 years at 0.50 on the same scale Dialysis generated QALYs=10.0 ( 10 x 0.75 + 5 x 0.5)
    • 25. Typically done with questionnaires - Disease specific . International prostate symptom score, LC-13 - Generic( SF-36 , NHP) - Utility ( EQ-5D, HUI  Utility Assessment - TTO , SG, VAS 
    • 26.    Measures healthy time lost from specific diseases and injuries in a population DALYs for a disease are the sum of the years of life lost due to premature mortality(YLL) in the population and the years lived with disability(YLD) for incident cases of the health condition. One DALY is one lost year of healthy life
    • 27.   Example : A woman is blind since 5 years and she died at the age of 50. What is DALY?( weight factor for blindness = 0.33) 5 x o + 45 X 0.33 + 30 x 1 = 34.85
    • 28.  Contingent valuation: is a method of valuing the benefits of health services based on estimates of the maximum amount that people would be willing to pay for the availability of a service or the minimum amount that they would accept as compensation for not having the service available
    • 29.     Cost-Minimisation Analysis (CMA) Cost-Benefit Analysis (CBA) Cost-Effective Analysis (CEA) Cost-Utility Analysis (CUA)
    • 30.   it compares two or more options that achieve the same effect(similar outcome). Looks for lowest cost for existing service provision (no benefits considered)
    • 31.   .. is a method to determine which program or treatment accomplishes a given objective at the least cost benefits are expressed in natural units  E.g.: reduced mortality or live-years gained death averted , points of blood pressure reduced, reducing the risk of a health problem
    • 32.  Dr Do good wants to compare two different strategies of for preventing the spread of malaria which is endemic in district, to see which one offers the best value for money. Options: spray mosquitoes sites with insecticides. Another is to provide impregnated bed nets for households. What measure of benefit should he use to compare them. What information does he need to calculate it?
    • 33.  Cost per death aveted= cost/ (efficacy x no. treated x prob. contracting x CFR Spraying breeding site Impreg nated bdnets Annual program cost $10000 $10000 efficacy of Rx 15% 85% Number treated 10000 1000 Prob of cont racting disease 80% 80% CFR 5% 5% Death averted( 2x3x4x5) 64 34 Cost/death averted(1/6) $156 $118
    • 34.   CEA cannot be used to compare interventions with different health outcomes If the quality of life is the health outcome, then CUA should be considered or if the productivity increases are significant benefit, then CBA may be better
    • 35.    CBA is an evaluation method for comparing the monetary value of all resources consumed(costs) in providing a program or intervention with the monetary value of the outcome(benefit) from that praogram or intervention Benefits and costs are expressed in monetary units! Advantages: allows comparison of programs of entirely different outcomes
    • 36.   To value benefits in health care in monetary units is difficult Solution:    individuals willingness-to-pay approaches Human capital approaches Benefit- cost>0 or Benefit/cost>1
    • 37.   a form of cost-effectiveness analysis that compares costs in monetary units with outcomes in terms of the quantity and quality of life e.g., in QALYs, DALYs Eg $ per DALYs gained, $ per QALY
    • 38.      Average no of life years gained per death averted =40 Case morbidity rate=20 Average length of illness=1 mo Degree of disability during illness=80 DALY gained=(deaths averted x discoiunted average number of life years lost by 1 death) + ( case morbidity rate x probability of contracting disease x number treated x efficacy x lenth weighting x disability weighting) For spraying option: 10000/ (64 x 40) +(0.2x 0.8x 10000x 0.15x 0.083x 0.8) = just under $ 4 / DALY gained  For bed nets: 10000/ (34 x 40) +(0.2x 0.8x 1000x 0.85x 0.083x 0.8) = just under $ 3 / DALY gained 
    • 39.  - - Limitation of CUA Measurement of utility is very time and resource intensive Lack of consensus on which measurement methods
    • 40.   - Carrying out an economic evaluation is not just about producing a final figure for the cost effectiveness of a particular strategy Decision making required Marginal cost and benefit information Affordability Flexibility Health service capacity and attitude
    • 41.     Patient attitude Connecting different options Generalization of the result Opportunity cost
    • 42.     Health Economics for DevelopingCounries: A Practicle Guide, The university of York Oxford Textbook of Public Health , 6th edition, oxford publication Park textbook of Preventive and Social Medicine, 21st edition A shiel, E Donaldcon and C. Milton et al “Health Economic Evaluation” J. Epidemio & Community Health 2002 56; 85-88
    • 43.     Anne Mills and Lucy Gilson “Health Economics for Developing Countries: A Survival Kit” HEFP working paper 01/88, LSHTM, 1988 Himanshu sekhar rout and Narayana chandra nayak“HEALTH AND HEALTH ECONOMICS: A CONCEPTUAL FRAMEWORK” “Health Economics in India” New Century Publications, New Delhi, 2007, pp. 13-29. Classes of health economics by pramod GC Class on economic evaluation in ERT vellore

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