Note 3-CEA, CBA, CUA.pptxefhejbvbvskjvbfcbb

5.Cost-Effectiveness
Analysis (CEA):
Theory and Methods
1

INTRODUCTION
 Cost-effectiveness analysis is one of a number of
techniques of economic evaluation in which
consequences of different interventions are measured
using a single outcome, usually in ‘natural’ units:
 life-years gained,
 deaths avoided,
 heart attacks avoided or
 cases detected.
 Alternative interventions are then compared in terms of
cost per unit of effectiveness.
2

INTRO…
 Many cost-effective analyses rely on existing published
studies for effectiveness data, as it is often too costly
or time consuming to collect data on costs and
effectiveness during a clinical trial.
 Under CEA, effects are measured in terms of the most
appropriate uni-dimensional natural unit.
Example:
1. If the question to be addressed was: what is the best
way of treating renal failure?
 Then the most appropriate ratio with which to compare
programmes might be ‘cost per life saved’.
3

EXAMPLE …..
2. If we wanted to compare the cost-effectiveness of
programs of screening for Down’s syndrome;
 the most appropriate ratio might be ‘cost per Down’s
syndrome fetus detected’.
3. In deciding whether long-term care for the
elderly should be provided in nursing homes or the
community;
 the ‘cost per disability day avoided’ might be the most
appropriate measure.
4

INTRO…
 The aim of cost effectiveness analysis is to maximize
the level of benefits – health effects – relative to the
level of resources available.
 CEA is considered a full economic analysis.
 All the principles that apply to costs are applicable in this
analysis.
 All cost-effectiveness analyses should be subjected to
sensitivity analysis, which should be included as part of
the reporting of the findings. 5

COSTS IN CEA
 In cost-effectiveness analysis it is conventional to
distinguish between the:
 direct costs,
 indirect or productivity costs - associated with the
intervention, as well as,
 intangibles - although they may be difficult to quantify,
are often consequences of the intervention and should
be included in the cost profile.
6

WHEN SHOULD CEA BE USED?
 When a limited range of options within a given
field are available
 given a limited budget.
 Here appropriateness of outcome measures is
very important:
 Final outcomes vs intermediate outcomes
Generally final outcomes should be selected
7

EXAMPLES OF EFFECTIVENESS MEASURES USED IN CEA
Clinical field Effectiveness measure
Treatment of
hypertension
mmHg BP reduction
Treatment of
hypercholesterolemia
Percentage serum
cholesterol reduction
Asthma Episode free days
Thrombolysis Years of life gained
8

HOW TO USE COST EFFECTIVENESS ANALYSIS
 A distinction must be made between those interventions that
are:
 Completely independent –
 where the costs and effects of one intervention are not affected by
the introduction or otherwise of other interventions.
and
 Mutually exclusive –
 where implementing one intervention means that another cannot
be implemented, or where the implementation of one intervention
results in changes to the costs and effects of another.
9

INDEPENDENT PROGRAMS
 Using cost-effectiveness analysis with independent
programs requires that cost effectiveness ratios
(CERs) are calculated for each program and
placed in rank order:
10

EXAMPLE FOR INDEPENDENT PROGRAMS
 In Table 1 there are three interventions for different
patient groups, with the alternative for each of them of
‘doing nothing.
11

INDEPENDENT EXAMPLE …
 According to cost-effectiveness analysis,
program Z should be given priority over X since it
has a lower CER; however, in order to decide
which program to implement, the extent of
resources available must be considered (Table
2).
12

INDEPENDENT EXAMPLE….
 If a further program becomes available, it should be
considered on the basis of its CER figure compared
with Table 1.
 Resources for the new program should be considered in
the same manner as above.
13

MUTUALLY EXCLUSIVE INTERVENTIONS
 In reality, the likelihood is that choices will have to be made
between different treatment regimens for the same condition,
different dosages or treatment versus prophylaxis – that is,
mutually exclusive interventions.
 The key question is: what are the additional benefits to be
gained from the new therapeutic intervention, for example,
and at how much greater cost?
14

MUTUALLY EXCLUSIVE …
15
In order to answer such a question,
incremental cost-effectiveness ratios
(ICERs) are used:

16
The alternative interventions are ranked according
to their effectiveness – on the basis of securing
maximum effect rather than considering cost –
and ICERs are calculated as shown in Table 3.

 The least effective intervention (P1) has the same
average CER as its ICER, because it is compared
with the alternative of ‘doing nothing’.
17

MUTUALLY…
 The negative ICER for P2 means that by adopting P2
rather than P1 there is an improvement in life-years
gained and a reduction in costs.
 The ICER for P3 works out to be 120, which means that it
costs £120 to generate each additional life-year gained
compared with P2.
 Alternatives that are more expensive and less
effective are excluded.
18

MUTUALLY…
 In Table 3 both P1 and P3 are followed by programs that
have increased effectiveness and reduced cost.
 In other words, P2 and P4 are associated with a negative
ICER.
 P1 and P3 are therefore excluded.
 Having excluded P1 and P3, ICERs are recalculated for
P2, P4 and P5 and are as shown in Table 4.
19

 P2 is ‘dominated’ by P4 as the latter is more effective
and costs less to produce an additional unit of effect
(£57.14 compared with £66.67).
 The dominated alternative is then excluded and the
ICERs are recalculated again (Table 5).
20

MUTUALLY…
 The process can be illustrated as shown in Figure 1. In
our example, programs P4 and P5 would be in the cost-
effective quadrant.
 In deciding between them, the size of the available
budget must be brought to bear.
 If the available budget is £140,000, all patients should
receive intervention P4, while, if the available budget is
£170,000, all patients should receive the more effective
P5.
 Concept of mutual exclusion!!!
23

SENSITIVITY ANALYSIS
 The need for sensitivity analysis arises because of a
number of factors. These include:
I. Methodological issues - arising from different
approaches and methods employed in the evaluation
II. Potential variation in the estimates of costs and
effects used in the evaluation
III. Extrapolation from observed events over time or
from intermediate to final health outcomes
 Accuracy???
IV. Transferability of results and the validity of results
from different populations/patient groups.
24

SENSITIVITY ANALYSIS…
 ICERs therefore require some indication of the
confidence that can be placed in them.
 What would happen, for example,
 if the ‘true cost’ of one of the treatment strategies was
somewhat higher or lower than the estimate used in the
investigation, or
 if there were significant changes in the life-years gained or
other parameters used?
 Sensitivity analysis tests all the assumptions used in
the model and enables the impact of changes on the
baseline estimates to be investigated.
25

SOME ADDITIONAL POINTS ON CEA
 Which is best to be implemented (used) ? 26

ADDITIONAL POINTS…
 Dominance occurs when one drug is both more effective
and less costly than another.
 Cost-effectiveness analysis can indicate which one of a
number of alternative interventions represents the best value
for money.
 Cost-effectiveness is only one of a number of criteria that
should be employed in determining whether interventions are
made available.
 Issues of equity, needs, priorities and so on should also form
part of the decision-making process.
27

ADDITIONAL POINTS…
 CEA is not as useful when comparisons need to be
made across different areas of healthcare, since
the outcome measures used may be very different.
 In order to know which areas of healthcare are
likely to provide the greatest benefit in improving
health status,
 a cost–utility analysis needs to be undertaken using a
‘common currency’ for measuring the outcomes across
healthcare areas.
 If information is needed as to which interventions will
result in overall resource savings, a cost–benefit
analysis has to be done, although both cost–utility
analysis and cost–benefit analysis have their own
drawbacks.
28

EXERCISE 1
 The following table is the cost and effectiveness of five completely
independent interventions.
 Show the program which is best to be implemented.
29
Interventions Cost (Dollars) Effects (Lives
Saved)
P1 100 000 5
P2 50 000 7
P3 200 000 10
P4 150 000 12
P5 300 000 15

EXERCISE 2
 The following table is the cost and effectiveness of five mutually exclusive
interventions.
 Show the program which is best to be implemented.
30
Interventions Cost (Dollars) Effects (Lives
Saved)
P1 100 000 5
P2 50 000 7
P3 200 000 10
P4 150 000 12
P5 300 000 15

INTRODUCTION:
 Focuses on the quality of outcomes,
 In addition to quantities!!
 Many similarities with CEA
A sophisticated form of CEA
CUA differs in the way it considers
effects
32

INTRODUCTION:
 Outcomes are valued as generic rather than program
specific:
 CUA offers something that CEA more
generally cannot, which is the possibility
of comparing across treatments for
different conditions.
33

INTRO…
 CUA tends to be used when quality of life is an
important factor involved in the health programs being
evaluated.
 CUA combines life years (quantity of life) gained as a
result of a health program with some judgment on
the quality of those life years.
 It is this judgment element that is labeled utility.
 Utility is simply a measure of preference, where values
can be assigned to different states of health (relevant to
the program) that represent individual preferences.
 This is normally done by assigning values between 1.0
and 0.0. 36

INTRO…
 States of health may be described using many different
instruments which provide a profile of scores in different
health domains.
 EuroQol EQ-5D for example, simplifies health into just five
domains (such as mobility, self care, usual activities,
pain/discomfort and anxiety/depression).
 Each domain is given a score from 1 to 3,
 So the health profile would read 11111 for the best scores in all
domains and 33333 for the worst. 37

INTRO…
 This approach of using utility can be used to compare very
different health programs in the same terms.
 It is possible to compare surgical, medical, pharmaceutical
and health promotion interventions with each other.
 Comparability then is the key advantage of this type of
economic evaluation.
 The key problem with CUA is the difficulty of deriving health
benefits.
 Can a state of health in fact be collapsed into a single value?
 If it can, then, whose values should be considered in these
analyses?
 For these reasons, CUA remains a relatively little used form
of economic evaluation.
38

WHEN SHOULD CUA BE USED
1. When HRQOL is the important outcome
 When the interest is focused on how well the different
programs will be improving the patient’s
 physical function,
 social function, and
 psychological well being.
2. When the program affects both morbidity and mortality and
you wish to have a common unit of outcome that combines
both effects.
 For example, treatments for many cancers
 improve longevity and improve long-term quality of life,
but
 decrease quality of life during the treatment process itself.
39

WHEN SHOULD CUA BE USED…
3. The case of limited budget situation
 When the programs being compared have a wide range of
different kinds of outcomes and we wish to have a common
unit of output for comparison.
 For example, if you are a health planner who must compare
several disparate programs applying for funding, such as
expansion of neonatal intensive care, a program to locate and
treat hypertension,
4. When we wish to compare a program to others that have
already been evaluated using cost-utility analysis.
40

EXAMPLE
 If you are a director of chronic disease control in MoH
and need to design disease intervention strategies with
$1,000,000 at this time, you have to show the better
intervention alternatives for the payers.
 E.g. Diabetes versus HIV/AIDS
41

EXAMPLE…
 Diabetes – health compromise
 kidney, heart, nerve and premature
death
 HIV/ AIDS
Pulmonary complication, Infection,
Premature death
 Affect
 Population
 Physiology
 Complication
 mortality
42

EXAMPLE..
 Diabetes versus HIV/AIDS ,
The better health benefit for the population,
Health related quality of life (HRQOL)
can be assessed using DALY or QALY
which are the measure of the value of
health outcomes.
Take samples, assess & calculate.
43

QUALITY OF LIFE
Definitions
 Health related QOL: is a multidimensional concept
referring to a person’s total well-being including his or
her psychological, social and physical health status.
 HRQOL: The value assigned to duration of life as
modified by the impairments, functional states,
perceptions and social opportunities that are influenced
by disease, injury, treatment or policy.
44

MEASURING QUALITY
 Measuring a person’s quality of life is difficult.
 Nonetheless, it is important to have some means to
have for doing so
 since many health care programs are concerned
primarily with improving the quality of a patient’s life
rather than extending its length.
 For this reason, various quality of life scales have
been developed in recent years.
45

GENERAL OR SPECIFIC
46
General:
 Applicable across
 all diseases or
conditions,
 different medical
interventions, and
 a wide variety of
populations.
 E.g.
 Medical Outcomes
Study (MOS)
 Sickness Impact
Profile (SIP)
Disease specific:
 measures are
designed to be used
in populations with
specific conditions
or diagnosis.
 E.g.
 Arthritis Impact
Measurement Scale
(AIMS)
 European
Organization for
Research and
Treatment of Cancer
Quality of Scale
(EORTC-QLC)

QUALITY – ADJUSTED LIFE – YEARS (QALY)
 It is a year of life adjusted for its quality or value.
 One year in perfect health is considered equal to 1.0
QALY.
 The value of a year in ill health would be discounted.
 It is commonly used in health economic evaluations as
a means of quantifying the health effect of a medical
intervention or a prevention program and ultimately to
help payers allocate health care resources.
 Combine all dimensions of health & survival into a
single index.
47

CALCULATION
 The QALY is a measure of the value of health
outcomes.
 It assumes that health is a function of
length of life and
quality of life,
 It combines these values into a single index number.
 To determine QALYs, one multiplies the utility value
associated with a given state of health by the years
lived in that state.
 A year of life lived in perfect health is worth 1 QALY (1
year of life × 1 Utility value).
48

CALCULATION
 A year of life lived in a state of less than perfect
health is worth less than 1 QALY;
 For example, 1 year of life lived in a situation with
utility 0.5 (e.g. bedridden, 1 year × 0.5 Utility) is
assigned 0.5 QALYs.
 Similarly, half a year lived in perfect health is
equivalent to 0.5 QALYs (0.5 years × 1 Utility).
 Death is assigned a value of 0 QALYs, and in
some circumstances it is possible to accrue
negative QALYs to reflect health states deemed
"worse than dead’’. 49

EXERCISE
 Which of the following patient has better QALY?
A. Two years life with 0.8 utility value.
B. A year & half lived with perfect health.
C. Four years life with 0.6 utility value.
D. Eight years lived with 0.1 utility value.
E. A year lived with 0.99 utility value.
50

WEIGHTING
 The "weight" (utility) values between 0 and 1 are
usually determined by methods such as those
proposed in the Journal of Health Economics.
1. Time-trade-off (TTO): Respondents are asked to
choose between
 remaining in a state of ill health for a period of
time, or
 being restored to perfect health but having a
shorter life expectancy.
51

WEIGHTING (TIME TRADE-OFF (TTO))
 For chronic states, the subject is offered two alternatives:
 State i for time t (life expectancy of an individual with the chronic
condition) followed by death;
 Healthy for time x < t followed by death
 Time x is varied until the respondent is indifferent between the two
alternatives at which point the required preference score for state i
is given as hi = x/t
52

EXAMPLE: RHEUMATOID ARTHRITIS
TIME-TRADEOFF
 Imagine a new drug can cure you completely, but will
shorten your life.
 If your life expectancy was 20 years, what is the
maximum time you would give up?
53

WEIGHTING
2. 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.
54

STANDARD GAMBLE ….
The probability P is varied until the
respondent is indifferent between
the two alternatives, at which point
the required preference score for
state i for time t is simply P. that
is hi = P 55

STANDARD GAMBLE
 Imagine a new drug can cure you completely, but severe
reactions kill a percentage of people.
 What is the maximum percentage risk of death you
would be willing to take?
56

WEIGHTING
3. Visual analogue scale (VAS): Respondents are
asked to rate a state of ill health on a scale from 0
to 100, with 0 representing being dead and 100
representing perfect health. This method has the
advantage of being the easiest to ask, but is the
most subjective.
57

DIRECT SCALING (VISUAL ANALOGUE)
 Imagine you have rheumatoid arthritis:
 you have constant partially controlled pain, but can do most
daily tasks, though with much difficulty.
 The joints of your hands are now deformed, but function with
assistive devices.
5/4/2024
58

WEIGHTING…
4. EuroQol: Another way of determining
the weight associated with a particular
health state is to use standard
descriptive systems such as the
EuroQol Group's EQ-5D questionnaire.
which categorizes health states
according to five dimensions: mobility,
self-care, usual activities (e.g. work,
study, homework or leisure activities),
pain/discomfort and anxiety/depression 59

QUALITY-ADJUSTED -LIFE-YEARS (QALY)
Computation of QALYs for a single health state
 QALYs for health state (i) = quality-adjustment weight
(i) x yrs in state (i)
Computation of QALYs for a lifetime profile of health states
 QALYs for lifetime profile= sum of QALYs for the i
health states in the path
60

EXERCISE
 Mr. Jonathan, died at the age of 77. His life
expectancy was 81 years. He lived a healthy and
stable 55 years which was estimated to be 0.96
HRQOL.
 But after this, he lived 11 years complaining strong
headache which reduced his HRQOL to 0.85.
 Then after, upon diagnosis he started a medication
for stroke lived with episodes and medication
discomforts for the rest of his life with 0.52 HRQOL.
 Calculate his QALY.
62

DISABILITY-ADJUSTED-LIFE -YEAR (DALY)
 The disability-adjusted life year (DALY) is a
measure of overall disease burden, expressed as
the number of years lost due to ill-health,
disability or early death.
 DALY is standardized quantitative measure for
burden of disease.
 DALYs are related to the quality-adjusted
life year (QALY) measure; however, QALYs
only measure the benefit with and without medical
intervention and therefore do not measure the
total burden. 63

DALY…
 Traditionally, health related problems were expressed using
one measure, the years of life lost (YLL) due to dying early.
 A medical condition that did not result in dying younger than
expected was not counted.
 The years lost due to disability (YLD) component measures
the burden of living with a disease or disability.
 Mortality does not give a complete picture of the burden of
disease borne by individuals in different communities.
 The summary measure used to give an indication of the
burden of disease is the DALY.
 DALYs are calculated by taking the sum of these two
components:
DALY = YLL + YLD
64

DALY….
 The DALY relies on an acceptance that the most
appropriate measure of the effects of chronic illness is
time, both:
 time lost due to premature death and
 time spent disabled by disease.
 One DALY, therefore, is equal to one year of healthy life
lost.
65

DISABILITY WEIGHT (DW)
 How much a medical condition affects a person
is called the disability weight (DW).
 This is determined by disease or disability and
does not vary with age.
 Tables have been created of thousands of diseases
and disabilities, ranging from Alzheimer's disease to
loss of finger, with the disability weight meant to
indicate the level of disability that results from the
specific condition.
66

Examples of Disability weight
Condition DW 2004[4]
Alzheimer's and other dementias 0.666
Blindness 0.594
Schizophrenia 0.528
AIDS, not on ART 0.505
Burns 20%-60% of body 0.441
Fractured femur 0.372
Moderate depression episode 0.350
Amputation of foot 0.300
Deafness 0.229
Infertility 0.180
Amputation of finger 0.102
Low back pain 0.061
67

DALY…
 It combines mortality and morbidity.
Mortality
LY (Life year lost = Life expectancy of – Age of death
due to the disease) healthy individual a disease at
being studied
 But the morbidity part is difficult to measure.
 Each illness effect given a severity weight by Disability
Weight i.e disability adjustment (DA).
68

DALY..
DA = disability weight X duration of disability
 Example – An individual dies at 60 years and with out
Diabetes his life expectancy was 75 year.
 YLLs = 75-60 = 15 mortality part of DALY
 If morbidity affect kidney complication disable 50% of
10 years life:
 YLD = 0.5 X 10 = 5 morbidity DALY
 Sum total: 5+15 = 20 DALY 69

DALY…
 At the population level, the disease burden as measured
by DALYs is calculated by adding YLL to YLD.
 YLL uses the life expectancy at the time of death.
 YLD is determined by the number of years disabled
weighted by level of disability caused by a disability or
disease using the formula:
YLD = I x DW x L
 I = number of incident cases in the population,
 DW = disability weight of specific condition, and
 L = average duration of the case until remission or death
(years).
70

EXERCISE
A man with HTN + DM died at the
age of 76 even though his life
expectancy was 86.
He lived his last 8 years losing his
eyes, given a disability weight of
0.6.
What will be his DALY?
71

QALY & DALY
# BOTH INCORPORATE DISEASE RELATED REDUCTION IN
THE YEARS OF LIFE.
# BOTH SCALE 0 – 1
# COMPARE HOW SICK PEOPLE ARE ACROSS A
CERTAIN DISEASE STATE.
72
QUALY
 Quantify health
 Bigger is better
 Utilities for QALY
 The utility is how good
they feel
DALY
 Quantify burden
 Smaller is better
 Disability weight for
DALY
 The disability weight is
how much people are
disabled by their illness

ABOVE EXAMPLE
Diabetes versus HIV/ AIDS
 #of people have diabetes
 #how much shorter life
 #how much disability they suffer
Information can be found
 Clinical surveys
 Epidemiological studies
 Global burden of disease table
73

7. COST-BENEFIT ANALYSIS
 Cost benefit analysis is the most comprehensive and
theoretically sound form of economic evaluation.
 It has been used as an aid to decision making in many
different areas of economic and social policy in the
public sector for more than fifty years.
 Cost-Benefit Analysis (CBA) estimates and totals up the
equivalent money value of the benefits and costs to
the community of projects to establish whether they are
worthwhile.
75

CBA…
 The main difference between cost-benefit analysis
and other methods of economic evaluation is that it
seeks to place monetary values on both the
inputs (costs) & outcomes (benefits) of health
care.
 CBA requires program consequences to be valued
in monetary units, thus, enabling the analyst to
make;
 a direct comparison of the programs incremental cost
with its incremental consequences in commensurate
units of measurement, be their Birr, dollars, or pounds.
76

CBA…
 CBA compares the discounted future streams of
incremental program benefits with incremental programs
costs;
 the difference between these two streams being the net
social benefit of the program.
 The goal of analysis is to identify whether a program’s
benefits exceed its costs,
 a positive net social benefit indicating that a program is
worthwhile.
 CBA is a full economic evaluation because program
outputs must be measured and valued. 77

ADVANTAGES OF CBA
 CBA is broader in scope and able to inform questions of
allocative efficiency, because it assigns relative values
to health and non-health related goals to determine
which goals are worth achieving, given the alternative
uses of resources, and thereby determining which
programs are worthwhile.
 (E.g., the benefit from adding a new drug for
multiple sclerosis to the provincial drug program’s
formulary compared to building a bridge over a
river that will save hours of transportation time).
78

ADVANTAGE…
 If the value of benefits exceeds the costs of any
intervention, then it is potentially worthwhile to carry
that intervention out.
 It is concerned with the question, is a particular goal
worthwhile?
 Potentially it can answer questions such as should
extra money be used for heart transplants or
improving housing?.
79

DISADVANTAGE
 Method requires that all resources and benefit
generated by an intervention need to be assigned a
monetary value.
 Therefore, needs to cost things which have no
market value, i.e, changes in health, quality of life,
length of life, pain, etc.
 The problem is huge measurement
challenges in putting a dollar value on
human lives and health states.
80

STAGES IN THE APPLICATION OF CBA
Identify all costs and benefits
Measure them
Discount them back to common time
period
Assess whether benefits>costs
Perform sensitivity analysis
Assess whether project is worth it
81

APPROACHES FOR DETERMINING A MONETARY
VALUE FOR HEALTH OUTCOMES
Methods of valuing
 Willingness to pay (WTP)
 Human Capital Approach
82

APPROACHES…
1. Productivity or Human Capital Approach
 The theory of investment in human capital is that
the human being is viewed as a capital
investment, the sole purpose of which is
economically productive output.
 Therefore, health changes should be valued by
the changes in economic productivity they
cause.
83

TYPES OF LOST PRODUCTIVITY
 Mortality loss: years lost due to premature death = life
expectancy at death – age at death
 Morbidity loss: impact on productivity is more difficult to
measure i.e., it is not simply the number of work days
lost because:
 ability to return to work may be occupationally related and the
change in health status may necessitate job switching
 returning to work does not necessarily mean resuming the
same level of productivity
84

VALUATION OF LOST PRODUCTIVITY IN THE HUMAN
CAPITAL APPROACH
Assumes that the value of a worker's
productivity = earnings (because a profit-
maximizing employer will not pay a worker
more than the additional value she
contributes)
85

COST-BENEFIT DECISION INDEXES
 Cost-Benefit Ratio = benefits/costs
 Net Present Value (NPV) = benefits - costs
A worthwhile project is one for which the discounted
value of the benefits exceeds the discounted value of the
costs; i.e.,
the net benefits are positive.
This is equivalent to the benefit/cost ratio being greater
than one.
86

10Q!!!
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See U Again!!!!! 87

Note 3-CEA, CBA, CUA.pptxefhejbvbvskjvbfcbb

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Note 3-CEA, CBA, CUA.pptxefhejbvbvskjvbfcbb