A talk given at an ICN WA meeting in Perth by Elizabeth Geelhoed on the health economics of ICU

1. Health Economics in Intensive Care
July 2016
Elizabeth Geelhoed
School of Population Health
The University of Western Australia

2. Outline
•The rise of economics in health
•Measuring efficiency
• The case of ICU
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3. The increasing cost of health care
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4. Total health expenditure, % of GDP
Source: OECD Health Data 2013
Australia
OECD average

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6. http://ucatlas.ucsc.edu/spend.php
Expensive health care is not always the best health care

8. The emergence of health economics
• The rise and rise of health with economic
development
• The recognition of unsustainability first with the
exponential increase in drug costs in the 1980s
– Australia first country to mandate cost-
effectiveness for reimbursement
– More recently - all technologies assessed for cost-
effectiveness through MSAC prior to listing on
Medicare.

9. Response to increasing demand
 Increase supply (opportunity cost)
 Decrease demand
 Improve efficiency

10. Measuring cost-effectiveness
 Methodology is prescriptive and accepted
globally
 Provides comparative analysis of alternative
courses of action in health services, in terms of
both their costs and consequences
 Most commonly reported as cost per LYG or
cost per QALY
 Rarely means saving money – it usually refers to
an acceptable investment for the expected return
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11. The cost-effectiveness plane

12. What is a good buy?
• Achieving health gains and concurrently reducing
cost is ‘cost-effective’ (but uncommon)
• Implicit threshold determine what is ‘cost-effective’
eg $50,000 per QALY gained
• Rule of thumb for global considerations given as
3XGDP per capita per DALY
• Value depends on society’s willingness to pay
where the decision rule is determined by i) budget
or ii) price per effective unit
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13. The cost effectiveness threshold and value
• All QALYs are not created equal – society is prepared
to pay more for some life years than others
• Implicit utilitarian principle of maximising years of life
seems in conflict with this (Equity-efficiency trade-off)
• Two broad objectives of a health system – to maximise
the health of the population and to reduce inequalities.
• Can ‘value’ take account of both by incorporating more
than a quality year of life – eg ethical principle of acting
when there is the opportunity to save a life??
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14. The ‘rule of rescue’
• Term coined by Jonsen (1986) to describe the
perceived duty of protecting a life even when the
resources may be used more efficiently
• Example of Oregon’s priority list for Medicaid based
on quality of expected outcomes and cost (cost-
effectiveness). The list was revised before it
reached the legislature because of obersight with
regard to life-saving treatments
• Value judgement will always be a factor in priority
setting
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15. Criteria for prioritising interventions
o ‘Rule of rescue’
o Priority for more severe disease
o Priority for children and young adults over the elderly
o Priority for a greater spread of benefit rather that a
large benefit for a few
o Priority where there is a greater potential for
improvement

16. The case of ICU
• In the last 30 years – from life-threatening illnesses
for individuals expected to make a full recovery
(primarily infections and trauma) to a place for the
seriously ill, often with complex diseases, often
aged and often for end-of-life care
• This is particularly well documented in the U.S.
where one in three Medicare beneficiaries spends
time in ICU during their last month of life
• In an age where we can always do more, does ICU
present an exception?
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17. Author: Stephen Duckett, Presentation to Women's and Children's Health Network Futures Forum

18. Author: Stephen Duckett, Presentation to Women's and Children's Health Network Futures Forum

19. Cost-effectiveness in ICU
• Reduction in waste
• Reduction in errors
• Preventive care
• ? Reductions in LoS? (mixed results)
• ? Role substitution (some evidence of reduced
efficiency)
• Advanced care directives
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20. End of life care
• In the last month of life, 1 in 3
Medicare beneficiaries is admitted to
an ICU*
• Very little evidence-base for
outcomes*
• Should the cost of care influence
decisions?
Halpern NEJM 2015 373:21

21. Conclusion
oIn an era of an increasing need for evidence-
based policy, health interventions require objective
evaluation of their societal value, both from a
clinical and an economic perspective
oAre we currently achieving best value or should
we consider re-ordering priorities and changing our
approach to funding and service delivery?
oPressure on the health dollar combined with ever
increasing expectations of optimal health and
survival will require community discussion around
difficult prioritisation decisions

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Thank
you

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Thank you