Economic Evaluation of Health Care
(Evaluasi Ekonomi untuk Pelayanan Kesehatan)
Prof. dr. Bhisma Murti, MPH, MSC, PhD
Institute of Health Economic and Policy Studies (IHEPS), Department of Public Health,
Faculty of Medicine, Universitas Sebelas Maret
Getting the best value
for health spending
What is Economic Evaluation?
Economic evaluation is the comparative analysis of
alternative courses of action in terms of both their costs and
consequences
Cost
(resources,
inputs A,B,C)
Consequence
(benefit, utility,
outcome, effect A,B,C)
Health care
(intervention or
program A,B,C)
The Rationale for Economic Evaluation in Health Care
Resources are scarce (budget constraint, limited number of health care staff, lack of medicine, etc.) so they must be used efficiently and equitable
Clinical decision making has cost implication to patient, insurance company, and government that pay for the health care provided
Economic evaluation provides a scientific tool for selecting the most cost-effective health intervention
Health care
No
n-h
ea
lth
ca
re
Budget
constraint
Budget
relaxed
How Do We Do Economic Evaluation?
Decision rule:
Choose the most cost-
effective intervention
(the best value for
limited budget)
Intervention C?
Competing alternatives
(saling bersaing)
Limited budget Intervention A?
Intervention B?
Cost-effective
intervention
Population health
Budget
Technical Efficiency (Efisiensi Teknis)
Produce the same level of output with less cost or higher level of output with the same cost (cost-efficiency)
Rp 100,000,000
Intervention A
costs
Choose Choose intervention A because it
costs less to produce the same level
of output as intervention B
Rp 200,000,000
Intervention B
costs
Allocative Efficiency (Efisiensi Alokatif)
Resources are allocated such that community welfare at large is maximized
Allocative efficiency can be achieved if all parties across sectors produce efficiently
Health programs
No
n-h
ea
lth
pro
gra
ms Utility (welfare) to the
community at large
Allocatively efficient
because resources
allocated meet the highest
utility to the community)
Allocatively
inefficient (too
much health
program)
Types of Economic Evaluation
Types of economic evaluation: 1. Cost-effectiveness analysis (CEA)
Cost-Minimization Analysis (CMA)
2. Cost-utility analysis (CUA)
3. Cost-benefit analysis (CBA)
Full economic evaluation compares
both costs and consequences of two
or more alternatives
(Drummond et al. 2005)
Cost-Effectiveness Analysis
Compares alternative interventions where costs are measured in monetary term and benefits in natural units:
– Number of patients showing better clinical outcome
– Number of infants immunized
(note: both the above examples refer to an immediate outcome of health care intervention)
– Number of child death averted
– Years of life gained, etc.
Can be used to address technical efficiency
Where the level of health benefits of all alternatives are equal, so only costs of the alternatives to be compared, this CEA is called Cost-Minimization Analysis (CMA)
Cost-Utility Analysis
Compare alternative interventions where health benefits are measured in QALYs, DALYs, HYEs, HALYs, etc
Quality-Adjusted Life Year (QALYs) are valued on a utility (U) index where U=1 represents perfect health and U=0 represents death
Example of QALYs:
– 5 years of perfect health = 5 QALYs
– 3 years of perfect health followed by 2 years in a state valued to be 0.8 of perfect health= (3 years x 1U) + (2 years x 0.8U) = 4.6 QALYs
Can address both technical efficiency and allocative efficiency
What is QALY?
Quality-adjusted life year (QALY) is a measure of
health benefit or health state that combines the
quantity and quality of life
Improved
quantity of life
with program
Improved
quality of life
with program
Quality
of life
Time
QALY without
program
0
1
Cost-Benefit Analysis
Comparing alternatives where both costs and benefits are measured in monetary terms
Valuation method of health benefits: 1. Human capital approach
2. Willingness to pay (WTP)
Can compare two or more interventions across different sectors (e.g., health, education, transportation) according to their net effects on community welfare Can address allocative efficiency
Costs Health
benefits
Basic Model of Decision Making
An economic evaluation can be performed within the context of an experiment or other studies, a simulation model, or their combination
CHOICE
Program
A
Program
B
Consequences
Consequences
Probability A
Probability B
Consequence A
Consequence B
Decision Rule
CER+ CER++++
Choose alternative intervention
with lower C/E Ratio (CER)
Choose
Intervention A
CEA for Independent Interventions
For example: Oral Rehydration Therapy and Immunization are independent programs, each aims to avert child mortality
For independent intervention, calculate the cost-effectiveness ratios (CERs):
CER of each intervention implies comparison with “do-nothing” alternative
Draw a table comparing the alternatives List the alternatives from the most effective to the least effective one Compare the CERS, select the most cost-effective alternative
CER= C/E C= cost of intervention
E= effectiveness of intervention
CEA for Mutually Exclusive Interventions
For example: current immunization program and immunization plus nutrition program are mutually exclusive. Added nutrition element is called incremental.
For mutually exclusive programs, calculate the incremental cost-effectiveness ratio (ICER):
Draw a table comparing the alternatives List the alternatives from the least effective to the most effective one Compare the ICERS, exclude the “dominated” alternative Redraw a new table until 2 alternatives left
ICER= (C1 – C2) / (E1 - E2) C1= cost of program 1
C2= cost of program 2
E1= effectiveness of program 1
E2= effectiveness of program 2
How To Compare and Choose the More Cost-Effective One among Alternative Interventions
Cost-effectiveness
plane demarcates
acceptable ICER
Alternative with ICER
below and to the right
of the plane are likely
to be acceptable.
New intervention less
costly, more effective
(“Dominance”)
New intervention
more costly,
more effective
(“Cost-effective”)
New intervention
more costly, less
effective
(“Excluded”)
New intervention
less costly, but
also less
effective
(“Questionable”)
Current
Intervention
Effectiveness difference (ΔE)
Co
st
dif
fere
nc
e (
ΔC
),
*Bell et al., 2006
Summary (Ringkasan)
Resources are scarce, so they must be used
efficiently and equitably
Economic evaluation provides a scientific
tool for clinicians and health planners to
choose the most efficient health
intervention to attain the highest possible
health status of the patient and community