OHE Lunchtime Seminar 21 September 2016

1. Health economic
evaluation throughout
the ages
Prof Philip Clarke,
School of Population Health
University of Melbourne
Seminar, OHE
Wednesday 21 September 2016

2. Scope
• While acknowledging earlier work (Petty,
Smith) will focus on:
– Victorian era 1860-1900
– Early 20th Century work (mainly from the US)
– Post-war and development of modern
economic evaluation
– End in late 1960s
• Product of several years part-time
research using a variety of data-bases –
google scholar, JSTOR, Trove et.al.

3. “Value of human life”
• Lot of discussion in the Victorian Era
about the value of life in the context of:
– Taking life (what crimes should receive
capital punishment)
– Loss of life natural disasters and war
– Reductions in mortality from advances
such as improvements to the water supply
• Several attempts to place empirical
value on life and use it economic
evaluation

4. Anonymous 1865 (Saturday Review)
• In 1865, in Mobile, Alabama, in the Southern United
States, an ordnance depot exploded, killing some
300 persons.
“If a similar catastrophe had happened, say, in Oxford..
we should not have heard the last of it for weeks. The
intrinsic value of Oxford, both in an architectural
point of view and in the quality of its inhabitants, is
doubtless greater than that of Mobile…”

5. Anonymous 1871 (Saturday Review)
Goes on to argue that value we place on life
maybe too great largely on Malthusian grounds.

6. William Farr (1807-83)
• British epidemiologist and
founder of medical statistics
• Worked on the census and used
a “Babbage” difference engine to
develop a life table based on
census data
• Book on vital statistics contains
detailed estimates of the value of
life based on difference between
wages and living costs

7. Farr’s estimates of the value of life
So life was worth £243

8. First cost benefit analysis: Of the 1875 Public
Health Act aimed at preventing cholera
Publication of the American Statistical Association 1891
PublicHealthAct
Value of life £175 ( Estimated by Farr)
Present value £80K-280K
Total cost: $US583million(1891 Est)
Total Benefits:850 thousand lives saved
worth $US650million (1891 Est)
Victorian era health economic evaluation
shows cleaning up the water supply was
worth the money, but only just!

9. Doctors considering cost as well as outcomes
Published in Science in 1881
“The trouble and cost of making fresh gas every few
days has caused the great abandonment of its use.”
“Small cylinders amounts [cost] thirty-five cents for
each administration
“taking into account the value of human life, nitrous
oxide should stand at the head of all anesthetics,
and its practical use be encouraged instead of ether
and chloroform. ”

10. First Cost effectiveness analysis, BMJ 1899
Can find no google scholar citations
Notes that Bengal has the lowest cost per treated case.
Indicate that this maybe due to licensing of inoculators.

11. Economist efforts to understand infant mortality
Causes of infant mortality have long been of
interest to economists:
• Jevons argued a key factor is women from lower
income households working in factories (Jevons 1880).
• Mayo Smith in a publication of AEA in 1888:
“So, when in Bavaria we find that the infant mortality is highest in those
counties where the mothers are accustomed to work in the field or the
factory and feed the children on artificially prepared food, we have the
cause of the increased mortality.” (p. 248)
• Bowley on correlation in infant mortality:

12. Statistical techniques used to tackle these
issues (circa 1912)

13. Charles Value Chapin (1856-1941)
• Medical doctor and public health
researcher
• Superintendent of health for
Providence, Rhode Island
between 1884 and 1932.
• Under took one of the first studies to link
census & tax data to mortality (1924)
• Publish a paper on the Value of life in
1913, which argues the value of life must
move beyond human capital

14. JAMA 1917
JAMA 1917; 2 citations

15. • “Sometimes a city councilman, getting his knowledge
from the syndicated science of his Sunday paper,
assumes to tell how the health department should be
run.”
• “Again, it may be the new health officer himself who, in
order to justify the political overturn of his office, seeks
to reorganize the health work of his city after a few
hours' study of some passing book on "sanitation.“”
• “Rare, indeed, is it that competent advisers are called
in to plan a health department so as to utilize most
effectively the best scientific knowledge of how to
preserve the health of the city…”
Then and now?

16. Chapin’s ideal allocation of health resources
• Contains the insight that if you started again you may end
up with a different mix of expenditure
• Tries to constructs a “league table” to compare
effectiveness relative to spending across a wide range of
interventions
HealHealth economics in the age of scarcity

17. Edgar Sydenstricker (1881-1936)
• Born in 1881 in China (moved to the US in
1896).
• Son of missionary parents and brother of Perl
Buck
• Graduated from Washington and Lee
University, Virginia.
• Undertook research Fellowship in Economics
from the University of Chicago 1908.
• Worked as journalist, then for United States
Immigration Commission and the United States
Commission on Industrial Relations (interested
in wages, working conditions, and scales of
living of industrial workers).

18. Career in public health research
• In 1915, he was appointed the first statistician in the United
States Public Health Service
• While at the Public Health Service he worked on a broad range
of issues:
– Health inequalities;
– Health insurance;
– Measurement of morbidity;
– Evaluation of public health interventions;
• In 1923 took leave of absence for one year to organize the
Epidemiological Service of the Health Organization of the
League of Nations.
• In 1930s had input into proposal for development of national
health insurance in the United States
• Was involved in the development of the first US National Health
Survey.
• Died of a stroke in1936.

19. Academic productivity
• Prolific publication output (120 over his career
including several books)
• Mainly published in public health journals and in
books.
• Several papers in statistical and economic journals.
0
2
4
6
8
10
12
14
Publication Counts by Year

20. Empirical work involving measures of morbidity
From cotton mills work Depression as a natural experiment of
effect of income change on health

21. Evaluation of Public Health Interventions
• Depression in 1930 saw
dramatic increase in unemployment
& poverty in USA
• Argued for the expansion of public health
measures in 1930s in response to the
depression
• These were included in 1935 Social Security
Act, but no funds appropriated
• Argued strongly for the funds ($13.5 million),
but for an additional $2 million for evaluation
of the most effective interventions

22. Contributions to economic evaluation
The Milbank Memorial Fund Quarterly, 1936, 2 citations

23. Importance of measure outcomes
• Agued that evaluation of public health
should be based on outcomes, not
inputs or process measures;

24. Ways of measuring outputs via observation
• Detailed discussions of how to measure public health
interventions
• Does not propose trials, but believe in the use of
controls to isolate the effects
• See evaluation of TB
intervention (left)
Using time trends in Deaths

25. Dorfman 1943 screening for syphilis
• In WWII the US army wanted to screen recruits
for syphilis
• Screening was done by a blood test – so two
options for efficient screening :
– Screen blood of each individual
– Pool blood across individuals and then re-test
each individual if a group is found to test
positive
– Optimization problem which will depend on
the prevalence of syphilis
• Widely cited paper from 1943 (850 citations, but
not that well known by health economists).

26. Lower the prevalence- larger the groups
What scope is there for improving the efficiency of any type of
medical screening by group testing?

27. Health Economics post-war
• Two traditions:
– Operations researchers & economists mainly
working for the US military
– Economist working mainly on public health
problems (e.g. for newly formed WHO)
• Quite separate traditions – with little cross
over during the 1950s
• Operations research has its origin in the
air defense of Britain, taken up by US
military during WW2 & afterward.

28. Origins of cost-effectiveness
Outcomes, here are deaths rather
than lives saved, but the analysis is
very much the same

29. Efficiently saving lives…
US defense secretary who
was appointed by Kennedy
advocated using
operations research to
improve efficiency of the
US military
Inspired one of the first
CEAs to look at cost per life
year….

30. US Military commissioned at least two
set of contractors (including RTI and
Stanford Research Institute to conduct
evaluations )
Even by todays standards they are
sophisticated involving:
• A Cost-effectiveness plane
• Consideration of parametric
uncertainty
• Computer simulation
• Wide range of sensitivity analyses
Search into the most cost-effective way to
survive a nuclear war

31. “Public health” in the time of nuclear war
A US Military commissioned study into the most cost-effective
ways to get people into fallout shelters
First Cost-effectiveness analysis to use lives saved as an
outcome
Stanford Research Institute, Nov 1965

32. Simulating the effects of nuclear war

33. Public health tradition: Gunnar Myrdal
• Provided advice to the WHO on how to value health program
particularly in developing countries in 1952.
• Argued that its hard to measure the economic value of programs
in developing countries
• Argued that cost and benefits are likely to be different in short run
and very much linked to more general development.

34. Selma J. Mushkin (1913-1979)
• Mushkin received her BA in economics from
Brooklyn College in 1934, MA and PhD follow.
• Worked on a wide range of health and other public
sector issues
• Worked between academia and public service
Public Health Reports, 1958, 103 citations

35. Towards a definition of Health Economics
One of first papers to try to define health economics as a
discipline
Examined what makes health different, focusing on why we
simply cannot rely on consumer preferences including:
• Externalities (influenza vaccine)
• Public goods Fluoridation of water
• Societal need to care (e.g. looking after the mentally ill)
• Interestingly cites, Smith and Farr, but not Sydenstriker

36. Herbert Klarman 1917-1999
• Born in Chmielnik, Poland
emigrated in 1929 to New York
• Degree in economics from Columbia University in
1939
• Professor of public health administration from
1962 to 1969 at John Hopkins
• Undertook several economic evaluations including
the first to use of a QALY
• Wrote first Health Economics text book (1965)

37. Medical Care 1968, 360 citations
• Attempts to value renal
dialysis
• Uses a combination of
lifetable methods as well as
first known attempt to adjust
life years for quality of life
• Fanshel & Bush develop the
theoretical underpinning later

38. Before the decade was out we have the QALY
Contains:
Time-trade-off
Person trade-off
Paired comparisons
Notion of health status index

39. Oh to be in England?
Hinchliffe Committee which included Maurice
Kendall (the statistician) recommended:
(i) information on "economy in prescribing" to be
included in the medical curriculum;
(ii) need for postgraduate instruction of GPs in
pharmacology to enable them to judge the
manufacturers claims;
(iii) more clinical trials and to publish the results
in an independent journal;
(iv) economic and social aspects of the NHS to
be researched (in and outside of government);
(v) the appoint a permanent expert committee
which should include an economist.

40. Martin Feldstein contribution to the NHS (1939 - )
Oxford Economic Papers,1963

41. Impact of the Office of Health Economics- first
research paper

42. Our Scientific Editor Financial Times (London, England) ,
Thursday, February 25, 1965, Issue 23,554, p.16 (147867
words).
Compared with Dr Evil’s one million $ ransom
– drug development was expensive!

43. OHE focusing on obesity back in the 60s
Fishlock, David Financial Times (London, England) , Wednesday, April 2, 1969, Issue 24,813, p.17 (200826
words). From The Financial Times Historical Archive, 1888-2010

44. Back in 60s the OHE was “Health Economics”

45. My top five economic evaluations
Cheat slightly and suggest everyone should read
Selma Muskin’s Towards a definition of health
economics anyway…
1.Gary N. Calkins, “Some Results of Sanitary Legislation in England Since 1875”,
Publications of the American Statistical Association, Vol. 2, No. 14 (Jun., 1891),
pp.297-303 5 citations
2.Charles V. Chapin, “The relative values of public health procedures”, JAMA July
4 1917 ;LXIX(2):90-95. 2 citations
3.Edgar Sydenstricker, “Economy in Public Health”,The Milbank Memorial
Fund Quarterly,Vol. 14, No. 1 (Jan., 1936), pp. 3-12 2 citations
4.Robert Dorfman “The Detection of Defective Members of Large Populations”
Ann. Math. Statist. Volume 14, Number 4 (1943), 436-440 851 citations
5. Herbert E. Klarman, John O'S. Francis and Gerald D. Rosenthal, Cost
Effectiveness Analysis Applied to the Treatment of Chronic Renal Disease,
Medical Care, Vol. 6, No. 1 (Jan. - Feb., 1968), pp. 48-54 314 citations

46. What would I take to my desert Island?

47. The end of the beginning…