health economics
TRANSCRIPT
HEALTH ECONOMICS
MS. ANCY CHACKOIIND YEAR M.Sc NURSING
GOVT. COLLEGE OF NURSINGALAPPUZHA
HISTORICAL VIEW
WHAT IS ECONOMICS?
Economics is the science of scarcity. It analyses how choices are structured and prioritized to maximize welfare within constrained resources.
Economics is the study of distribution of scarce resources commonly known as goods and services across a population
WHAT IS ECONOMICS?
The Economics is the science that deals with the consequences of resources scarcity.
The discipline of economics deals
with use of scarce resources to satisfy human wants and needs how best to use the resources available.
MODELSPOSITIVE ECONOM
ICS•to establish cause and effect in a scientific manner
NORMATIVE ECONOMIC
S
•establishing the means by which socially desirable outcomes can be achieved
WHAT IS HEALTH?
. According to World Health Organization's (WHO)
constitution health is 'a state of complete physical, mental and
social well being and not merely the absence of disease or
infirmity'
“Health" in health economic (evaluation) is health status according to some measure.
DEFINITIONS OF HEALTH ECONOMICS
Health economics is the study of distribution of health care. It is a branch of economics concerned with issues related to efficiency, effectiveness, value and behavior in the production and consumption of health and health care.
DEFINITIONS OF HEALTH ECONOMICS
It is the allocation of resources within the health system in the economy, as well as functioning of health care market.
DEFINITIONS OF HEALTH ECONOMICS
Health economics is concerned with the formal analysis of costs, benefits, management, and consequences of health and health care. It is the branch of economics concerned with the application of economic theory to phenomena and problems associated with health and health care.
DEFINITIONS OF HEALTH ECONOMICS
Health economics is the study of how scarce resources are allocated among alternative uses for the care of sickness and the promotion, maintenance and improvement of health, including the study of how health care and health-related services, their costs and benefits, and health itself are distributed among individuals and groups in society. It can, broadly, be defined as 'the application of the theories, concepts and techniques of economics to the health sector'.
CONCEPTS IN HEALTH ECONOMICS
Resources Scarcity opportunity of cost efficiency production of health health care market
CONCEPTS IN HEALTH ECONOMICS
Macro-economics
economy level of outputs
level of national incomegeneral price
level
CONCEPTS IN HEALTH ECONOMICS
Microeconomics •Microeconomics is the study of economic behavior of individual decision making units such as: consumers, resource owners and business firms in a free enterprise economy.
•This can be measured by conducting market surveys, pilot and feasibility studies.
CONCEPTS IN HEALTH ECONOMICS
Health Microeconomics Health microeconomics is concerned with how individuals choose, minimize costs or maximize profit or utilities within a given health care system within a set of rules and prices.
COMPONENTS OF HEALTH ECONOMICS
Meaning and scope of health economics
Determinants of health
Demand for health and health care
Supply of health care
Health care markets
COMPONENTS OF HEALTH ECONOMICSThe relationship between economic growth and health
Health sector budgeting and planning
National health systems
Equity in health outcomes and in health care
International health.
Medical advances
Due to increase in
life expectancy
Changes in family
structure and norms
Advances in health research
Higher expectation
among people
public awarene
ss
NEED FOR HEALTH
ECONOMICS
IMPORTANCE OF HEALTH ECONOMICS
• To formulate health services
• To establish the true costs of delivering health care or to estimate all real costs like the use of patients' time, loss of output elsewhere in the system etc
IMPORTANCE OF HEALTH ECONOMICS
• To evaluate the relative costs and benefits of particular policy options
• To estimate the effects of certain economic variables like user charges, time and distance costs of accessibility, etc on the utilization of health services
• Health and economic development
• Organization and economic development
• To identify and measure health and diseases ,basic needs. To identify determinants of growth and economic development, elements of health expenditure by use of macro economics
• To determine the economic characteristics of health care and Health related activities
HEALTH POLICY ISSUES RELEVANCY OF ECONOMICS
• Finance aspects of health sector
• Demand analysis
• To find out the source of health care financing; social accounting system, self financing insurance etc.
• To analyze the determinants of demand, individual and supplier induced behavior, time, cost ,health payment system etc
HEALTH POLICY ISSUES RELEVANCY OF ECONOMICS
• Supply analysis• Health man power
• To determine the physical resources and costs, estimation of short term And long term cost curve
• To determine the labour market and demand for & supply of health workers,remuneration and other determinants of behavior ,productivity etc
HEALTH POLICY ISSUES RELEVANCY OF ECONOMICS
•Financial management
•Budgeting system and accounting ,inventory managment
HEALTH POLICY ISSUES RELEVANCY OF ECONOMICS
Major Tasks of Economics In Health (Care)
Descriptive Quantification
Explanatory or Predictive
Evaluative
FEATURES OF HEALTH ECONOMICS
Health and medical care is considered as economic goods
Health is a private or a public good Measurement of health is also
considered in economics Stock of health Investment aspects of health
FEATURES OF HEALTH ECONOMICS
Loss due to ill health Resource costs of different diseases,
effects of health and medical care provision
Planning of health and medical care Choice of technology in health care
system, etc. Provision of equity in health outcomes
and health care;
AREAS OF HEALTH ECONOMICS
Economic aspects of relationship between health status and productivity
Financial aspects of health care services
AREAS OF HEALTH ECONOMICS
Economic decision making in health and medical care institutions
Planning of health development and such other related aspects
FACTORS INFLUENCING HEALTH ECONOMICS
Extensive government intervention
Intractable uncertainty in several dimensions
Information asymmetric
Barriers to entry
Externalities and the presence of a third-party agent
TOOLS USED IN ECONOMIC ANALYSIS
Economic Variables
Relationships between Economic Variables
Graphical Representati
on of Relationship
s
The Direction of
the Relationship
s
ECONOMIC EVALUATION
Economic evaluation is the comparative analysis of alternative courses of action in terms of both their costs and consequences in order to assist policy decisions
Steps in Economic Evaluation Deciding Upon the Study Question
Assessment of Costs and Health Effects
Adjustment of timing
Adjustment for uncertainity
Making a decision
TYPES OF ECONOMIC EVALUATION
Cost minimization
Analysis (CMA
Cost-effectiveness Analysis
(CEA)
Cost-utility Analysis (CUA)
Cost-benefit Analysis (CBA).
Cost analysisCost analysis is a resource tool for
financial management in hospital or department. It is an economic evaluation technique that involves the systematic collection, categorization, and analysis of program or intervention costs, and cost of illness.
When to Use Cost Analysis?
Cost analysis can be used as an evaluation method when
-Only one program is being assessed, -Information about program
effectiveness is not available, or the interventions being assessed and compared are equally effective.
Objectives of Cost Analysis
To assess the efficiency and effectiveness of function and their cost implication.
To improve the policy relevance and utility through assessment, planning and avoidance of wasteful expenditure in the hospital.
To allow researchers to achieve cost minimization for the programs under consideration.
Purposes of Cost Analysis
A tool for planning and cost projection
To assess the efficiency of a programme
To assess the priorities Accountability To assess equity
Principles of Cost Analysis
Make explicit the analytic perspective
Describe the anticipated benefits Specify the components of costs Discount to adjust for differential
timing Perform a sensitivity analysis Calculate measurement of
efficiency
Framework of Cost Analysis
1. Identify and define the problem 2. Defining the alternatives 3. Defining the audience 4. Define the perspective 5.Define time frame 6. Determine the time frame and
analytic horizon 7. Choose a format/methodology
Basic Steps in Cost Analysis
Define program, treatment, or technology to be analyzed
Develop a framework for cost analysis of program
Describe objectives of analysis Select type of cost analysis Design methodology of cost analysis
Basic Steps in Cost Analysis
Apply principles of cost analysis Describe study outcomes Development of cost inventory Preparation of cost summary
Basic Steps in Cost Analysis
Measurement/evaluation of resources used
Calculate cost analysis results : total cost, average costs, and marginal costs
Sensitivity analysis and discounting
Total cost (TC)
• The total cost of a program or an intervention is derived by adding all the costs incurred in producing a given level of output. It includes the cost of all the personnel, the supplies, and the equipment that were identified in the cost inventory.
TC = Quantity of resource 1 X value of that resource 1 + ....+
Quantity of resource n X value of that resource n
Average cost (AC)
• The average cost is the cost per unit of output (e.g., cost per patient treated or cost per child immunized). AC is computed by dividing the total cost by the number of participants or other relevant intervention units. The formula is
AC = TC / Q ; Q= Units of output
Marginal cost (MC)
The marginal cost is the resource cost associated with producing one additional or one less unit within the same intervention/program
MC = Change in total costs/change in quantity produced Or
MC = (TC' -TC) / (Q' Q)
TC' = Total costs a higher output level TC = Total costs at lower output level Q' = Higher level of output Q = Lower level of output
Health Valuation Methods
Cost-of-Illness Method (COI) Non Market Valuation Methods
NON MARKET VALUATION METHODS
STATED PREFEREN
CE METHOD
REVEALED PREFEREN
CE METHOD
REVEALED PREFERENCE METHODHedonic pricing The hedonic method is based on the
principle that the prices that consumers pay or receive depends on characteristics of the person that can be objectively measured.
W = f (q,e,ex,a,g) Whereas W= the wage rate; q =a
measure of qualification; e= experience; ex = measure of experience; a= age; g=gender
REVEALED PREFERENCE METHODHedonic pricing
REVEALED PREFERENCE METHOD
Averting behavior method
The value of a small change in health status can be measured by the amount of money a person is willing and able to spend on some controlling or preventive device or defensive (averting) action. This amount of money represents the person's valuation of safety against a perceived risk.
STATED PREFERENCE OR CONTINGENT VALUATION METHOD (CVM)
This is direct method, uses primary surveys that ask persons to place values on an intervention to attain a level of health outcome.
Types of Cost Analysis
Cost-of-illness analysis
Cost-benefit Analysis (CBA)
Cost-effectiveness Analysis (CEA)
Cost-utility Analysis (CVA)
Cost-minimization Analysis
Cost-consequence Analysis
TYPE OF ANALYSIS COST OF INTERVENTION
OUTCOME CONCERN
Cost benefit analysis Monetary units Valued In cash terms Net cost: benefit ratio
Cost effectiveness analysis
Monetary units Qualitative non-monetary units eg: reduced morbidity or years of life gained or saved
Cost per unit of consequence or cost per years of life gained/saved
Cost utility analysis Monetary units Valued as UtilityEg: Quality adjusted life year (QALY)
Cost per unit of consequence or cost per QALY
Cost-minimisation-analysis
Equivalent outcome in all respect
The least cost alternative
COST-BENEFIT ANALYSIS
Cost-benefit analysis is a practical way of assessing the desirability of projects, where it is important to take a long view (looking at the repercussion in the future as well as in the near future and a wide view in the sense of allowing side effects of many decisions) Le. it implies the enumeration and evaluation of all the relevant cost and benefits.
-Prest and Terkey
COST-BENEFIT ANALYSIS
Cost Benefit Analysis (CBA) is an economic evaluation technique that measures all the positive (beneficial) and negative (costly) consequences of an intervention or program in monetary terms.
COST-BENEFIT ANALYSIS
CBA is a practical approach of appraising the desirability of an intervention involving public expenditure in terms of net social gain society.
CBA is the use of analytical techniques involving a monetary assessment to identify the total costs and benefits of a specific intervention
COST-BENEFIT ANALYSIS
COST-BENEFIT ANALYSIS
Benefits Direct Benefits Indirect Benefits Intangible Benefits
Benefits (B) > Costs (C) or Net Benefits (NB) = B -C > O.
Importance of Cost Benefit Analysis Cost Benefit Analysis is used for
determining priorities among various alternative programs or interventions.
It provides an estimate of the potential value of undertaking a course of action, i.e. instituting a new program or intervention or revising the old one.
It can also be used to compare health-related interventions to those in other economic sectors.
Importance of Cost Benefit Analysis
It enables policy makers to determine whether the value of its positive consequences exceeds the value of societal resources required to implement the program.
It estimates and totals up the equivalent money value of the benefits and costs of projects to establish whether they are worthwhile. .
It is a powerful and relatively easy tool for deciding whether to make a change or not.
Features of Cost Benefit Analysis
CBA adopts a broad societal perspective as it includes all costs and all benefits
CBA measures the outcomes in monetary terms.
It assess the desirability of program/intervention
Purposes of Cost Benefit Analysis
To assess the economic efficiency To decide whether to implement a
specific program To select among
competing/alternative options
Principles of Cost Benefit Analysis
• There must be a common unit of measurement. All the benefits and costs of the program/project must be measured in terms of their equivalent money value
• The CBA valuations should represent consumers or producers valuation.
• The valuation of benefits and costs should reflect preferences reveled by choices
Principles of Cost Benefit Analysis
• The benefits are usually measured by market choices.
• The marginal benefit should be equal to the market price.
• The gross benefits of an increase in consumption are an area under the demand curve.
Principles of Cost Benefit Analysis
• Some measurements of benefits require the valuation of human life. These values can be used to estimate personal costs in terms of increased risk or of reduced risk.
• The alternatives must be explicitly specified and considered in the evaluation.
• The impacts of the programmes must be defined
Principles of Cost Benefit Analysis
• The discounted present value of benefits should exceed the discounted present value of costs.
• Compare alternative programmes in terms of the expected benefits and cost ratio of each programme to determine which should receive priority for funding
Advantages of Cost Benefit Analysis
• It helps to allocate scarce resources to programs that maximize societal economic benefit
• It studies the full economic impact of all potential outcomes of an intervention.
Advantages of Cost Benefit Analysis
• It makes possible to compare different programs having different health outcomes, or health programs to non health programs.
• lt allows analysts to examine its distributional aspects; who will receive these benefits and who will bear the costs.
Drawbacks of Cost Benefit Analysis • It measures costs and outcomes in
monetary terms and not disease specific
• There is difficulty in assigning monetary values to all pertinent outcome including changes in the length or quality of human life.
• The results of CBA are only as good as the assumptions and valuations on which they are based.
Ratio approach
Net benefit approa
ch.
Approaches of Cost Benefit Analysis
Procedural Steps in Cost-Benefit Analysis
Identifying Intervention Outcomes
Health Outcome
Non-health Outcome
Intangible Outcome
Cost-effectiveness analysis
• Cost-effectiveness analysis is an economic study design in which consequences of different interventions are measured using a single outcome, usually in 'natural' units (for example, life-years gained, deaths avoided, heart attacks avoided or cases detected). Alternative interventions are then compared in terms of cost per unit of effectiveness.
Cost-effectiveness analysis
Cost-effectiveness analysis as tool decision-makers can use to assess and potentially improve the performance of their health systems. It indicates which interventions provide the highest 'value for money' and helps them choose the interventions and programmes which maximize health for the available resources.
Cost-effectiveness analysis
Cost Effectiveness Analysis (CEA) is a type of economic evaluation that examines both the costs and health outcomes of alternative intervention strategies.
Aim of Cost Effectiveness Analysis
• To maximize the level of benefits-health effects-relative to the level of resources available
Objectives of Cost Effectiveness Analysis
To compare alternative programs with a common health outcome
To assess the consequences of expanding an existing program.
Purposes of Cost Effectiveness Analysis
To identify the most cost-effective intervention from a group of alternatives
To provide empirical justification for a program
Purposes of Cost Effectiveness Analysis
To identify and exclude programs that is wasting resources.
To provide general information on the relative costs and health benefits of different alternatives
To evaluate the interventions in terms of efficacy (cost effective ratio), absolute health gain and affordability (absolute cost)
Drawbacks of Cost Effectiveness Analysis
• The data regarding direct costs such as doctors' or nurses' time and supplies used; indirect costs such as a portion of administrative costs, the cost of equipment are usually not readily available.
• It does not facilitate comparisons across different diseases when different outcomes have been used.
• Cost-effectiveness is the only one criterion for judging whether an intervention is effective or not.
Benefits of Cost Effectiveness Analysis
• This method is easy to understand and more readily suited to decision making.
• It provides empirical results for the decision makers to compare the costs and consequences associated with alternative programmes.
MEASURES FOR COST-EFFECTIVENESS
cost effectiveness ratio (CER)
net health benefits (NHB)
COST EFFECTIVENESS RATIO (CER) Average cost-effectiveness ratio (ACER) Marginal cost-effectiveness ratio (MCER) Incremental Cost-Effectiveness Ratio (ICER)
NET HEALTH BENEFITS (NHB)
It is the difference between the health outcome and cost divided by rate of substitution of money for health.
NHB = E-C/A.
ELEMENTS OF CEA
A clear study perspective, time frame, and analytic horizon An explicitly defined study question Relevant assumptions underlying the study Detailed descriptions of the interventions Existing evidence of the interventions'
effectiveness Proper identification of all relevant costs A comprehensive discussion of the results
PROCEDURAL STEPS IN COST-EFFECTIVENESS ANALYSIS
Defining the Problem Adopting a Research Strategy Specify Audience Define Perspective Specify the Time Frame Work Prepare the Analytic Horizon Decide the Type of Study Design Identify the Outcome Measures or Variable Search for Available Alternatives Identify the Types of Costs to be included in CEA Analysis
Utility is the value or worth of a level of health as measured by the preferences of an individual or society. Cost-utility analysis is one form of cost-effectiveness analysis, which allows the comparison of different health outcomes by measuring them all in terms of a single unit-(QALY)
(Maurice McGregor).
COST UTILITY ANALYSIS (CUA)
It weighs costs and. quality adjusted health outcome of each intervention in order to take the decision for the programme to be implemented.
COST UTILITY ANALYSIS (CUA)
quantity of life years / QALY
disability-adjusted life years /DALY
Measures of CUA
Health rating method
Time trade-off method
Standard gamble method
Health index method
Methods of QALY
The World Health Organization defines disability-adjusted life years (DALY) as 'a health gap measure that extends the concept of potential years of life lost due to premature death to include equivalent years of healthy life lost by virtue of being in states of poor health or disability'. In other words, one DALY is one lost year of healthy life.
DALY is a combined measure of years in disability
and years of life lost due to premature death (from the disability).
Disability-Adjusted Life Years
Years of Life Lost (YLL): YLL is the number of years of life lost due to premature death.
Years Lived with Disability (YLD): YLD is the number of healthy years lost due to disability from the condition until remission or death.
Measures of DALY
To measure health care costs and interventions To evaluate the effect of a nursing intervention
on patient outcomes when one of these outcomes is QOL
To compare use of a nursing process management with a disease process (hypertension) management
To assess cost utility for both medical interventions and nursing interventions
To compare current practice and the change in practice need
Advantages of CUA
It is used for comparing interventions to achieve one quality adjusted life year.
Cost Utility Ratio
COST MINIMIZATION ANALYSIS
Cost minimization analysis is a
specific type of analysis in which the outcomes of the two or more healthcare interventions are assumed equal. Therefore economic evaluation is based solely on comparative costs and result is least cost alternative
COST CONSEQUENCES ANALYSIS Cost consequences is a form of cost
effectiveness analysis comparing alternative interventions or programs in which the components of incremental costs (e.g., additional therapies, hospitalization) and consequences (e.g., health outcomes adverse effects) are computed and listed, Without aggregating these results (e.g., into a cost-effectiveness ratio).
COST CONSEQUENCES ANALYSIS Cost consequences analysis is a means
to estimate whether the value of results obtained is worth the investment. In a cost-consequences analysis, instead of combining the costs and effects, all the costs and outcomes are reported separately.
COST CONSEQUENCES ANALYSIS-ADVANTAGES
Simple to use and evaluates the entire program of care
Allows decision makers to impute their own values to the different costs and consequences Incorporates several outcome measures and easy to interpret the findings
Used to evaluate practice guidelines and disease state management programs.
COST CONSEQUENCES ANALYSIS-DISADVANTAGES
There is a difficulty of comparing outcomes between different interventions in order to prioritize them.
DISCUSSION