2. OUTLINE
1. Introduction
2. Principles of Health Economics
3. Economic evaluation
4. Status in India
5. Challenges and ways to address
6. Health Technology Assessment
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3. History and Evolution
1. Selma Mushkin: “Toward a Definition of Health Economics” – 1958
2. Kenneth Arrow: “Uncertainty and the Welfare Economics of Medical Care” – 1963
3. Special characteristics of the medical care market :-
Unpredictability and Criticality: Demand
Expected behaviour of the physician: Moral provision
Product uncertainty: Asymmetric information
Moral Hazard
Medical care: Increased cost – imperfect information
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4. Introduction
1. The application of the theories, concepts, techniques and principles of
economics to the health sector*
2. The World Development Report 1993 - necessity of providing cost
effective healthcare for the poor and that it can contribute towards
alleviating poverty
3. Scope – productivity, finance, planning, decision making
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5. Rationale
1. Budget for health is and always will be finite
2. All resources have alternative uses within the system
3. New health technologies – compete with the existing
4. Inconsistent triad: comprehensive, quality, everyone
5. “Prioritising” or “Rationing” – by decision makers
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7. Different types of costs
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Costing Principles
Opportunity cost Marginal costs Social costs
Dr Tanveer Rehman PSM JIPMER
8. Efficiency
• Knapp (1984): ‘the allocation of scarce
resources that maximizes the
achievement of aims’
1. Pareto / Allocative
2. Technical
3. Economic
4. Social
Equity
• Finance of healthcare
• Distribution of healthcare
• Distribution of health
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Principles
Efficiency – equity trade off
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9. Economic Evaluation
According to Drummond et al. (2005): Comparative and Incremental analysis
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11. I. Cost - Effectiveness Analysis (CEA)
Effectiveness
1. Outcome of an intervention or service measured in natural units: ease of
communication and specificity – e.g. Cases successfully diagnosed
2. Clinical indicators - Intermediate outcome measure: implicate ultimate
health status
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12. I. Cost - Effectiveness Analysis (CEA)
1. Benefits measured in same natural units
2. Outcome reported in single unit of measurement, given in natural
units e.g. mmHg for SBP reduction, life years gained by
transplantation
3. Outcome is common to both alternatives: but achieved to a
different degree
4. Incremental cost-effectiveness ratio (ICER)
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15. I. Cost - Effectiveness Analysis (CEA)
Effectiveness
Limitations:
1. More than one outcome reported for a treatment
2. May not reflect overall impact of service on patients Health-Related
Quality of Life
3. Comparisons across different outcomes cannot be done
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16. II. Cost – Utility Analysis (CUA)
Utility
1. Value attached by an individual to a specific level of health or a specific
health outcome
2. Allows patients to value their health status based on their own preferences
3. For same health status – different individuals will give different values
4. Comparisons between different illness and interventions
5. Methodologically complex
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17. Methods to Derive Utility
1. Visual Analogue Scale (VAS)
2. Standard gamble method
3. Time trade-off method
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Utility scores:
a. QALYs
b. DALYs
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18. a. QALY (Quality – Adjusted Life Years)
1. Quantity of life (survival periods) and Quality of life (health status value) –
standard unit of measuring health gain
2. QALYs are expressed in terms of “years lived in perfect health”: can be applied to
any kind of intervention.
3. It can be applied to compare different interventions
4. Limitations: validity, reliability, perspectives, quantity and quality in same metric
5. Should be discounted if they are to be added together
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19. b. DALY (Disability – Adjusted Life Years)
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20. b. DALY (Disability – Adjusted Life Years)
1. DALYs = “Years Lived with Disability” (YLDs) + “Years of Life Lost due to
premature mortality” (YLLs)
2. Health gap
3. Global Burden of Diseases (GBD) study: comparing disease burdens
across all regions of the world (Murray and Lopez 1996)
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21. II. Cost – Utility Analysis (CUA)
1. Outcome measured through effect on quantity & quality of life
2. To overcome limitations associated with effectiveness measures
3. Common metric that allows comparisons across: allocate resources to
different services
4. Form of CEA but outcomes measured using utility values
5. ICER presented as Cost per additional QALY Gained (CQG)
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24. III. Cost – Benefit Analysis (CBA)
Monetary terms
1. How much an individual would be willing to pay to avoid an illness or obtain the benefits
of a treatment
2. Contingent valuation or ‘willingness to pay’ (WTP) method
3. Possible to attach value to both health & non-health effects
4. Practical difficulty of monetary valuation of benefits and human life
5. Income closely related to WTP values
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25. III. Cost – Benefit Analysis (CBA)
1. Most comprehensive method of economic evaluation: returns in health investment
can be compared with other areas of economy
2. Both cost & benefit measured in monetary units
3. An activity should be undertaken if the sum of the benefits is greater than the sum
of the costs: Allocative efficiency
4. ICER need not be generated: Societal viewpoint taken
5. Can be used to allocate resources to different interventions like CUA
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27. IV. Cost-Minimization Analysis (CMA)
1. No difference in outcome measure
2. Outcomes being compared is same or assumed to be equal
3. Consideration of costs of each option – preferred option is cheapest
4. Simple and easy to interpret
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31. Challenges
1. Dearth of economic evaluation evidence for health-care interventions
2. No specialty courses in the field of health economics for those who
undertake mainstream economics courses or in medical or public health
3. General lack of awareness in terms of its value or potential application in
clinical or public-health research
4. Lack of government funding for economic evaluation studies in India
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32. Way forward
1. Capacity building: quality economic evaluations
2. Creation of Schools of Public Health
3. Demand for such studies as well as a scope for its use in policy making
4. Associations for health economics— the Indian Health Economics and Policy
Association (IHEPA) and the Health Economics Association of India (HEAI)
5. Institutional mechanisms - MTAB
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33. Health Technology Assessment
1. Health Technology: any method used to promote health, prevent and treat
disease and improve rehabilitation or long-term care
2. Health Technology Assessment (HTA) - evaluation of effectiveness and resource
use associated with new medical technologies for the purpose of providing input
to a policy decision.
3. Medical Technology Assessment Board (MTAB) - landmark development towards
evidence-based health policy making - essential step towards India’s path to UHC
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34. Goal of MTAB
After evaluating HT on their efficacy, appropriateness and cost effectiveness
Reduce the cost and variations in patient care, expenditure on medical
equipment in directly affecting the cost of patient care, overall cost of medical
treatment, reduction in out of pocket expenditure of patients and streamline
the medical reimbursement procedures for effective implementation of the
Universal Coverage Programme
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36. SUMMARY
1. History and evolution
2. Costs, costing principles, efficiency - equity
3. Four types of economic evaluation
4. Status in India
5. Challenges and ways to address
6. Health Technology Assessment
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cost of one more unit of output/ consumption; benefit from one more unit of output/ consumption
Efficiency: Obtaining the greatest output for a given set of resourcesFair distribution of that output amongst the population,
When one alternative is more effective but requires more resources ICER calculate; Expresses the cost required to achieve each extra unit of outcome (cost per unit of outcome); MCER ACER
ICERs generated can be plotted on to a graph ; value judgements to be made
Functional, social, psychological, cognitive, subjective factors; general population perspective is best
Mark your health status when in pneumonia, post antibiotic new health state: difference is health gain obtained by drugs; gold standard is gamble
All the above give utility measures 0 – 1. higher means better HRQoL.
QALY – most commonly used measure in CUA
Contingent means subject to change; Elicit monetary values for health; METHOD used affects the WTP value; Elicitation methods: discrete choices where you give options, Dichotomous choice (DC) or take it or leave it (TIOLI) or open ended.
Balance sheet in which costs and benefits are weighed up against each other.; Although in principle any common unit could be used, in practice money is the obvious
and natural choice, as it is the measure of value most used in modern economies. answering questions about whether or not a healthcare programme should be implemented, rather than which of a number of alternative programmes or interventions is the most efficient.; how they feel about the process of care/service
quality of economic evaluation studies for health care in India needs improvement; of a health-care intervention or programme pertaining to India
EE studies Guiding policy decisions
quality of economic evaluation studies for health care in India needs improvement. Only 6 % of the total studies were funded by the national or state government. Almost 30 % of the economic evaluation research in India was funded by international agencies or the UN/bilateral aid agencies.
quality of economic evaluation studies for health care in India needs improvement; Using the evidence-based and transparent HTA processes advocated by the MTAB – efficient and equitable health care provision
HTA undertaken; Department of Health Research (DHR), part of the MoHFW
National Institute for Health and Clinical Excellence (NICE) – UK