Health economics is the discipline of economics applied to the topic of health care. Broadly defined, economics concerns how society allocates its resources among alternative uses. Health economics addresses questions primarily from the perspective of efficiency, maximising the benefits from available resources or ensuring benefits gained exceed benefits forgone. This presentation covers the concept, components, importance, factors influencing, steps and various types of evaluation in health economics.

1. Presented by
Dr. Sindhu R
IIIrd year Postgraduate
Dept. of Public Health
Dentistry

2. › Introduction
› Concepts in Health Economics
› Components of Health Economics
› Importance of Health Economics
› Factors influencing Health Economics
› Tools used in Economic analysis
› Steps in economic evaluation
› Types of economic evaluation
• Cost-benefit analysis
• Cost-minimization analysis
• Cost-utility analysis
• Cost-effectiveness analysis
• Cost-consequences analysis
› Economic evaluation in oral health care
› Literatures on the economic evaluation of
different dental health care services
› Conclusion
› References

3. › Economics is the science of scarcity. It analyses how choices
are structured and prioritized to maximize welfare within
constrained resources
WHATIS ECONOMICS?
WHATIS HEALTH?
It is a state of complete physical, mental and
social well being and not merely the absence
of disease or infirmity

4. ‘A logical and explicit framework to aid health care workers,
decision-makers, governments, or society at large, to make
choices on how best to use resources’.
Jefferson T, Demicheli V, Mugford M. Elementary economic evaluation in health care.London: BMJ Books, 2000.
Quantification of
resources
EfficiencyEquity

5. Phillips CJ. Health economics: an introduction for health professionals. John Wiley & Sons; 2008 Apr 15.
“Maximising well-being at the least cost to Society”
Efficiency
Operational
Allocative
Social
Pareto

9. Macro-
economics
economy
level of
outputs
level of
national
income
general
price level

10. MACRO ECONOMICS MICRO ECONOMICS
 Study of total economic process
rather than one of the part
 Implies study of process of
production, consumption and
distribution aspects of economic
activity which is undertaken by
government/country
 Eg: GDP of a country
 Implies study of process of
production, consumption and
distribution aspects of economic
activity which is undertaken by
an individual/organization
 Eg: A company’s growth

11. Determinants of health
Demand for health and health care
Supply of health care
Health care markets
Health sector budgeting and planning
Economic growth and health
Equity in health outcomes and in health care
National health systems & International health

12. Extensive government intervention
Intractable uncertainty in several dimensions
Information asymmetric
Barriers to entry
Externalities and the presence of a third-party agent

13. Economic
Variables
Relationships
between
Economic
Variables
Graphical
Representation
of
Relationships
The Direction
of the
Relationships

14. Deciding
the Study
Question
Assessment
of Costs and
Health
Effects
Adjustment
of timing
Adjustment
for
uncertainty
Making a
decision

15. Cost-benefit
analysis
Cost-
minimizatio
analysis
Cost-utility
analysis
Cost-
effectiveness
analysis

16. › Cost benefit is a tool which modern financial analysts adopt before
undertaking any financial operation or commercial activity.
› Any system in the organization must produce more benefits as compared to
its costs for the organization to survive & prosper
Benefits > Cost

17. › Introduced by a French engineer & economist Jules
Dupuit
› In 1936, it was a simple way of weighing up project
costs and benefits, to determine whether to go
ahead with a project or not

18. › A cost benefit analysis is done to determine how well, or how poorly, a
planned action will turn out.
› The analysis relies on the addition of positive factors and the subtraction of
negative ones to determine a net result.
› CBA has been established primarily as a tool for use by governments in
making their social and economic decisions.
› CBA measures costs and benefits to the community of adopting a particular
course of action e.g. Constructing a dam, by-pass etc.

19. TO DETERMINE:
› Whether a solution/project is economically feasible
› Which of two or more projects provides the best return on investment
OTHER ISSUES:
› Is the project worthwhile financially?
› Is it the best option?
› Should it be undertaken at all?

21. Intervention
Direct Benefits
Indirect
Benefits
Savings in
productivity.
Improved
patient health
status / utility.
Reduced
health
services
resource use
Family and
friends quality
of life.

24. I. NET PRESENT VALUE MODEL
Difference between the present value of the benefits and the present value of the costs
II. BENEFIT-COST RATIO
Relationship between the relative costs and benefits of a proposed project, expressed in
monetary or qualitative terms
NPV>0 : Profit
NPV<0 : Loss

25. Define the
framework
for the
analysis
Identify and
classify
and benefits
Drawing a
timeline for
expected
costs and
revenue
Monetize
costs and
benefits
Discount
costs and
benefits to
obtain
present
values
Compute
net present
values.

26. › Inaccuracies in quantifying costs and benefits
› Element of subjectivity
› Cost-Benefit Analysis might be mistaken for a project
budget
› Ascertaining the discount rate

27. › Compares the costs of two similar interventions to ascertain which is
less expensive
USES
› Used to compare cost per course of treatment when alternative therapies have
demonstrated equivalent clinical effectiveness
› used to compare two products that have been shown to be equivalent in dose and
therapeutic effect
› comparing generic and therapeutic equivalents drugs

28. FUNDAMENTAL ASSUMPTIONS
1. Two options being compared must have exactly the same effect
2. The important alternatives have not been left out
EXAMPLE 1
Two VEGF inhibitors for the treatment of neovascular age-related macular degeneration may
have similar visual results
But, Types & incidence of adverse events associated with each may differ very
significantly
Cost minimization analysis
Compares the administration of the same VEGF inhibitor, with the same administration
technique, in the hospital outpatient setting versus that in a private office
Cost is compared to ascertain which is less expensive.

29. Interventions Cost Outcome
Malaria
treatment
A
Cost high Similar Reject
Malaria
treatment
Cost low Similar Select
EXAMPLE 2

30. MERITS
Simplest economic evaluation measure
Very useful method to evaluate cost of a specific intervention
DRAWBACKS
Can be used to compare only drugs with equivalent outcomes
In many real life cases, two interventions may not always have
equivalent outcomes

31. › CUA is used to measure interventions with multiple outcomes
› Determines both quantity & quality of life
› Unit used: QALY (survival time + changes in QoL)
Impact of interventions
Quantity of life Quality of life

32. QoL(Quality) Quantity
0: worst health length of time in that state
1: best health
Example..
A drug that yields an improvement in health state value of 0.6 over a period of 10 years  6
QALYs
QoL : 0.6
Length of time in that state/Quantity : 10 years
QALYs : 6
QALY
COST UTILITY RATIO
Used to compare interventions to achieve one QALY

34. “Economic study design in which consequences of different interventions are
measured using a single outcome, usually in ‘natural’ units (eg: life-years
gained, deaths avoided or cases detected). Alternative interventions are
then compared in terms of cost per unit of effectiveness.”
National Institute for Health and
Clinical Excellence (NICE)

35. • Outcome used:
– Cases (cost per cases detected/ prevented)
– Deaths (cost per death avoided)
– Years of life
– DALYs

37. +
I
-
+
More effective and
more expensive
IV
Less effective
and more expensive
More effective
and less expensive
II
-
Less effective
and less expensive
III
Differenceincost
Differences in effectiveness

38. B
C
Increased effectiveness
morecostly
lesscostly
Intervention is more
effective and more
costly(Questionable)
Intervention is less
effective and less
costly(Questionable)
A
Intervention is more
effective and less costly
(Dominant)
D
Intervention is less
effective and more
costly(Excluded)
Decreased effectiveness

39. Type of
analysis
Cost Outcome /Result
Cost
effectiveness
•Spend 1 dollar ,
• Buy Haemophilus
vaccine
•(Unit: Dollar)
Avert infection
Decrease by 1 case
(Unit: Health
outcome)
Cost Benefit
•Spend 1 dollar
• Buy Haemophilus
Vaccine
•(Unit: Dollar)
Earns 5 dollars
avoid work leave
averting infection
(Unit: Dollar)

40. Type of analysis Cost Result/ outcome
Cost Effectiveness
Cost Benefit
Cost utility QALY

41. Strength Weakness
CME Easy to perform Effectiveness not assessed
CEA
•Natural units of outcome
•Compares actions with same
outcome
Cannot assess actions with
different outcomes
CUA
Compares actions with
different outcomes
QALY comparison may not be
well defined
CBA
Compares widely
interventions
Monetary terms some times
controversial & not well
accepted
44

42. Type of
analysis
Cost Consequences Result
Cost
minimization
Money Identical in all respects
Least cost
alternative
Cost
effectiveness
Money
Different magnitude of a
common measure eg., LY’s
gained, blood pressure
reduction.
Cost per unit of
consequence eg.
cost per LY gained
Cost utility Money
Single or multiple effects not
necessarily common.
Valued as “utility” eg. QALY
Cost per unit of
consequence eg.
cost per QALY.
Cost benefit Money
As for CUA but valued in
money.
Net £
cost: benefit ratio.

43. › To estimate whether the value of results obtained is worth the investment
› Outcomes are shown in their natural units  left to decision makers to
determine if it was worth carrying-out
› Outcomes are reported separately from costs
› Presents the costs and consequences of numerous intercessions and the
results are declared in a disconnected method and are not combined with
costs

44. Example..
Left to decision makers to form their
own opinion

45. Economic evaluation of various
materials
Mobile dental unit: planning and
Vaccination programmes

46. STUDIES REPORTED

47. The existence of ineffectiveness and inefficiencies in service provision has to be
addressed.
The development of evidence-based practice, a recognition that resources are finite
and choices have to be made
Awareness of the need for fairness in resource allocation and service provision are
major steps along the road to answering the question of how much additional
resources should be put into health care in general.

48. › Barbara McPake etal. (2002). Health Economics. An international Perspective. Routeledge
Publishers, London.
› Ceri J.Philips (2005). Health Economics, Introduction for Health Professionals. Blackwell
Publishing.
› https://www.who.int/choice/about/en/
› https://www.healtheconomics.com/
› Culyer AJ, Newhouse JP, Pauly MV, McGuire TG, Barros PP, editors. Handbook of health
economics. Elsevier; 2000 Aug 2.
› https://annals.org/aim/article-abstract/2173507/major-concepts-health-care-economics