Role of Health Economics in Public Health

SPEAKER:-Preeti Rai

CONTENTS What is Health Economics? What Do Health Economists Do? Economic evaluation Cost minimization Analysis (CMA) Cost-effectiveness Analysis (CEA) Cost-utility Analysis (CUA) Cost-benefit Analysis (CBA) What do the decision makers want to know? Using Economics in Public Health Expenditure On Health In India Economic evaluation at global and national level Conclusion

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Economists view of the world…

Pessimist: bottle ½ empty Optimist: bottle ½ full Economist: bottle ½ WASTED!!

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The ‘Health Economic’ problem

Unlimited healthcare “wants” with rapid growth in health expenditure.

Insufficient health sector resources.

Choosing between ‘wants’ we can ‘afford’ given our resource ‘budget’.

Scarcity of these resources provides the foundation of economic theory and from this starting point, three basic questions arise:

• What goods and services shall we produce?

• How shall we produce them?

• Who shall receive them?

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What is Health Economics?

Theoretical framework to help healthcare professionals ,decision-makers or governments to make choices on…

…HOW to maximize the health of population given constrained health producing resources.

What health economists need is… To understand the relationship between resources used and health

outcomes achieved by alternative options.…and compare!

WHAT DO HEALTH ECONOMISTS DO?

Health economists are interested in the production of health at a number of levels. For example:

• What is health and how do we put a value on it?

• What influences health other than health care?

• What influences the demand for health care and health care seeking behavior?

• What influences the supply of health care? (The behaviour of doctors and health care providers.)

• Alternative ways of production and delivery of health care.

• Planning, budgeting, and monitoring of health care.

• Economic evaluation—relating the costs and benefits of alternative ways of delivering health care.

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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” (Drummond et al,1997)

Economic evaluation is not “choosing the cheapest”.

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Stages in economic evaluation

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Deciding upon the study question

Identifying the problem and aims of evaluation What is the problem? Why is this problem important? What aspects of the problem need to be explained?

Choosing the alternative options Describing the interventions accurately. Defining the counterfactual intervention (comparator).

Defining the audience Defining the info needs of the audience. Considering how the audience will use the study results.

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Basic types of economic evaluation

Cost minimization Analysis (CMA)

Cost-effectiveness Analysis (CEA)

Cost-utility Analysis (CUA)

Cost-benefit Analysis (CBA)

To compare therapy A vs. therapy B

Cost (A)

Outcome (A)

Cost (B)

Outcome (B)

Cost (A) - Cost (B)

Outcome (A) - Outcome (B)

1

2

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Cost minimization Analysis

Specific type of analysis in which the outcomes of the 2 (or more) healthcare interventions are assumed equal.

Therefore economic evaluation is based solely on comparative costs.

Result: least cost alternative.

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Cost-effectiveness Analysis In CEA, outcomes are measured in natural or physical units

(e.g. heart attacks avoided, deaths avoided…).

Only one domain of outcomes can be explored at a time.

Result: cost per unit of consequence (e.g. cost/LY gained)

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Cost-effectiveness Analysis

Decision rule:Two programmes A (comparator) and B.• If Outcome B = Outcome A => Compare costs (CMA).• If Outcome B > Outcome A and Cost B < Cost A, B is

dominant.• If Outcome B > Outcome A and Cost B > Cost A, we have to

make a decision.

In order to make a decision on which intervention to choose, a cost-effectiveness ratio (CER) should be calculated.

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Cost-effectiveness Analysis

The most commonly CERs used are the: Average cost-effectiveness ratio (ACER)

Incremental cost-effectiveness ratio (ICER)

The next question is : Is the intervention “cost-effective”?

ICER=Cost B−Cost A

Effectiveness B−Effectiveness A

ACER=Cost B

Effectiveness B

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B

A

D

C

increase in health effects

more costly

less costly

Intervention is less effective and more

costly(Excluded)

Intervention is more effective and more

costly(Questionable)

Intervention is less effective and less

costly(Questionable)

Intervention is more effective and less costly (Dominant)

Cost-effectiveness plane

decrease in health effects

There are some important features to notice about cost effectiveness as a method of assessing which is the best use of resources:

a) just because something is cost-effective it does not mean you can afford it

b) Even if something is cost effective you may need it – e.g. immunisation with basic EPI vaccines is one of the most cost

effective interventions. DOTSc) The cost effectiveness will vary with the conditions and the

target group concerned.

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Cost-utility Analysis In CUA, the outcomes are measured in healthy years, to

which a value has been attached.

CUA is multidimensional and incorporates considerations of quality of life as well as quantity of life using a common unit.

Result: Cost per unit of consequence (e.g. cost/QALY).

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Cost-benefit Analysis CBA try to value the outcomes in monetary terms, so as to

make them commensurate with the costs.

Result: Net benefit or cost-benefit ratio.

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Summary

Type of Analysis ResultResultConsequencesCosts

Cost Minimisation

Cost BenefitCost Benefit

Cost Utility

Cost Effectiveness

Money

Single or multiple effects not necessarily common.

Valued as “utility” eg. QALY

Different magnitude of a common measure eg., LY’s

gained, blood pressure reduction.

Least cost alternative.Least cost

alternative.Identical in all respects.

MoneyMoney

Money

MoneyCost per unit of

consequence eg. cost per LY gained.

Cost per unit of consequence eg.

cost per LY gained.

Cost per unit of consequence eg.

cost per QALY.

Cost per unit of consequence eg.

cost per QALY.

As for CUA but valued in money.As for CUA but

valued in money.Net £

cost: benefit ratio.Net £

cost: benefit ratio.

What do the decision makers want to know?

Is there a health gain?Is there a cost difference?What is the relationship between cost and

outcome differences?Is the cost justified by the benefit (CEA/CUA)?Is there a net gain (CBA)?Is this result robust or sensitive to

parameters?

Using Economics in Public HealthResources are scarce: economists can

provide input as to how to allocate resources better.

Economic results can help advocate for more resources.

Economic analysis can help design better policy.

Consider that there are two ways to treat the same disease x and y. If x costs less and leads to more health benefits than y, the decision will be quite clear. If x costs more than y, but has more benefits than y, the decision is not as straightforward. Before we can get to this stage, we have first to assemble and analyse the evidence.

Expenditure On Health In India

The expenditure on health in India comprises 5.2% of GDP including public health investment at 0.9% of the GDP. Countries like Bangladesh and Sub-Saharan Africa spend about 3% of their GDP on health.

33% of this budget goes to the richest 20% of the population, whereas the poorest quintile gets only 10% of the money.

This results in understaffed public health centres with minimum medicines, poorly maintained equipment and poor quality of care. This pushes people into the private sector and there they have to spend their major income on health care.

80% of outpatient care and about 40% to 60% inpatient care is provided by the private sector. This naturally affects access to health care, especially for the poor.

For example, the hospitalisation rate for the poorest quintile is only about 5 % , whereas for the richest quintile it is about 35% that is practically seven times more.

So poor people specially have two options, either they spend their valuable money going to the private sector or remain without any treatment putting their lives at risk. They sell their assets and properties to pay the doctors and the hospital.

Role of economist in the health sector

Interested in many of the same areas as other health professionals

How can we improve survival, quality of life and fairness in access to services

Economics brings a different framework for analysing such questions

Does not matter how much we spend on health care, we still seem not to be able to provide all the health services that are demanded

Are we investing in the wrong kinds of health services?

Are we organizing services so as to best improve the health of the population?

Are we investing in technologies that have a low health output compared with alternative investments?

Because resources are limited, choices have to be made on how to best allocate these finite resources among investments. For governments, investment choices have to be made between alternative public services.

Examples of investment choices include: between malaria prevention and malaria treatment

programmes; or, more broadly, between TB, malaria and HIV programmes; or even more broadly between education and housing

programmes.

IMMUNISATION IN INDIA

India is a country where 50% of the population do not receive the six basic vaccines against diphtheria, whooping cough, tetanus, polio, tuberculosis and measles. The incremental cost of complete immunisation with these basic vaccines is less than $0.75 (30 rupees) per child.

The push to include expensive new vaccines must be viewed in this context.

Any vaccine introduced in developing countries needs to be weighed in relation to its cost and benefit.

ROTAVIRUS

Mass RIX4414 vaccination in India would probably prevent substantial morbidity and mortality at a cost per life year saved below typical thresholds of cost effectiveness.

So such a programme in similar settings, should be weighed up carefully.

HIB CONJUGATE VACCINATION

Hib conjugate vaccination is a cost-effective intervention in all States of India.

Although investment in Hib conjugate vaccination would significantly increase the cost of the Universal Immunization Program, about 15% of the incremental cost would be offset by health care cost savings.

Efforts should be made to speed up the progress for nationwide introduction of Hib conjugate vaccination in India.

10 Development Challenges

Top solutions – renowned economists

Solution Challenge

1 Micronutrient supplements for children (A&zinc)

Malnutrition

2 The Doha development agenda Trade

3 Micronutrient fortification (iron and salt iodization)

Malnutrition

4 Expanded immunization coverage for children Diseases

5 Biofortification Malnutrition

6 Deworming, other nutrition programs in school

Malnutrition

7 Lowering the price of schooling Education

8 Increase and improve girl’s schooling Women

9 Community-based nutrition promotion Malnutrition

10 Provide support for women’s reproductive role WomenReference: http://www.copenhagenconsensus.com

Behavior

Change

Micronutrient & Deworming

3 broad intervention groups

• Supplements for children:Vitamin A, therapeutic Zinc, multiple micronutrient powders, deworming

• Supplements for pregnant women: Iron-folic acid, iodized oil capsules• Supplements for general population: Salt iodization, iron fortification of staple foods

• Breastfeeding• Complementary feeding• Handwashing

• Treatment of severe acute malnutrition • Prevention/treatment of moderate malnutrition

India’s Budgetary Allocation for Health (US$ million) 2001-02 to 2006-07

Data for 9 countries: prevalence of anemia

01020304050607080

%

child

male

female

Tanzania Bangladesh Mali India Nicaragua Pakistan Honduras Egypt Bolivia0

1

2

3

4

5

6

Present value of annual losses due to anemia, 9 countries, US $ per capita

Cognitive lossPhysical loss

Loss,

US $

per

capit

a

PV of losses due to anemia potentially avertable by fortification

05

101520253035

US $

/cap

ita not avertable

avertable

Cost-benefit of iron interventions

Benefit:cost ratio ranges from 3:1 to 10:1 for physical productivity alone (median 6:1)

Ratio ranges from 3.8:1 to 14:1 (median 8.7:1) when including cognitive effects

I.e., provided that assumptions are appropriate, iron interventions should be very high priority

Economic impact of tuberculosis in india

Due to work loss and debts TB cost Rs 12,000 crore annually

And 3Lakh school dropouts due to parental TB .The cost to the patient for diagnosis and succesfull treatment averages US doller 100-150, more than half of annual income of daily wage laborer.

Problem In Indian health economyIn light of the fact that India still has one of the highest levels

of child and maternal deaths all over the world, public health expenditure in India is grossly inadequate.

Besides the low level of government allocation and spending on health, under-utilisation of available funds suggests that the problem is deeply systemic.

Some of such systemic weaknesses that constrain fund utilisation under NRHM –a programme with huge potential to transform health care delivery in India.

These include distorted fund allocation (both across states and components); inadequate capacity among health societies to prepare and

cost out health plans; unnecessary delays in fund transfers from one level of the

bureaucracy to another; and acute shortages in infrastructure and medical staff, both of

which impede sustained, quality delivery of health services.

CONCLUSION

For now it is probably safe to conclude that the 'gold standard' type of economic evaluation is either cost-utility analysis or cost-benefit analysis, and that there remains important debate within the health economics profession regarding which is more appropriate to the analysis of public health interventions.

Difficult choices in health care are inevitable and there is an increasing emphasis on making decisions explicit and fair.

Health economics suffers from a number of methodological limitations but it can offer us useful concepts and principles which help us think more clearly about the implications of resource decisions we make.

Health economics should be made an integral part of the health management right from the peripheral level to intermediary and apex referral hospitals. Health administrators, doctors and other health personnel should be oriented to this new discipline.

Thie can be achieved by including and emphasising 'health economies' in undergraduate and postgraduate medical curriculum. Refresher courses for the health administrators in health economics would also be of considerable help.

REFRENCES1. Baltussen, K. Floyd and C. Dye, (2005) “Cost effectiveness analysis of strategies

for tuberculosis control in developing countries,” British Medical Journal, 331;1364, (originally published online 10 Nov 2005; doi:10.1136/bmj.38645.660093.68)

2. D. R. Hogan, R. Baltussen, C. Hayashi, J. A. Lauer, J. A. Salomon, (2005) “Cost effectiveness analysis of strategies to combat HIV/AIDS in developing countries,” British Medical Journal, doi:10.1136/bmj.38643.368692.68 (published 10 November 2005)

3. C. A. Goodman, P. G. Coleman, A. J. Mills, (1999) “Cost-effectiveness of malaria control in sub-Saharan Africa” The Lancet, vol. 354, 378-85, July.

4. Drummond M. Economic analysis alongside control trials. London: Department of Health, March 1994.

5. Kernick D. Costing principles in primary care. Fam Pract 2000;17:1766–70.6. Torgerson DJ, Spencer A. Marginal costs and benefits. BMJ 1996;312:35–6.

Thank you