1. Session 7: Defining & Assessing Benefits for Economic Evaluation
1. Why, what and how of benefits.
2. Benefit assessment for CEA.
3. Benefit assessment for CUA.
4. Practical exercise in estimating benefits for CUA.
HEA PTP: M212 Economic Evaluation

2. Maximise benefits for given resources
Why Measure Benefits?
Efficiency
Maximise benefits for given resources
HEA PTP: M212 Economic Evaluation

3. Key Features of 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”.
1. Costs and consequences - efficiency!
2. Comparative - relative efficiency
HEA PTP: M212 Economic Evaluation

4. Benefit Categories Intervention Direct Benefits Indirect Benefits
Savings in productivity.
Improved patient health status / utility.
Reduced health services resource use eg. LoS.
Family and friends quality of life.
HEA PTP: M212 Economic Evaluation

5. Should Changes in Productivity be Included?
May depend upon viewpoint (govt., societal, NHS)
Main issues are level of ‘true’ loss and comparability
Measurement of value of loss (gross wage, friction cost)
Double-counting, especially with CUA/CBA
Comparability with ‘health’ focus (viewpoint again)
Comparability with other studies (applies to other variables also)
Solution?
Provide a good reason why they should be measured/included
Report separately from other results
Differentiate measurement and valuation
HEA PTP: M212 Economic Evaluation

6. Should Benefits be Discounted?
Why not discount?
Health, unlike resources, cannot be traded over time
Inter-generational equity (cf environmental economics)
If are discounted, may be different rate to cost
Why discount?
Inconsistent treatment costs and benefits
Inconsistent policy, especially in comparison with other sectors
Counter-intuitive conclusions for investment. eg always postpone!
Individuals do trade health over time ((dis)invest in health)
HEA PTP: M212 Economic Evaluation

7. Negative And Positive Benefits (and Costs!)
C/E ratio = net cost/net benefits
Net cost = positive cost + negative cost
Net benefit = positive benefit + negative benefit
Negative cost = cost saving, eg reduced LoS
Negative benefit = reduced health, eg adverse event
HEA PTP: M212 Economic Evaluation

8. Types of Economic Evaluation
Type of Analysis
Costs
Consequences
Result
Cost Minimisation
Dollars
Identical in all respects.
Least cost alternative.
Cost Effectiveness
Dollars
Different magnitude of a common measure eg., LY’s gained, blood pressure reduction.
Cost per unit of consequence eg. cost per LY gained.
Cost Utility
Dollars
Single or multiple effects not necessarily common. Valued as “utility” eg. QALY
Cost per unit of consequence eg. cost per QALY.
Cost Benefit
Dollars
As for CUA but valued in money. eg willingness-to-pay
Net $
cost: benefit ratio.
HEA PTP: M212 Economic Evaluation

9. How Can Health Be Measured?
Length of life
Mortality (numbers, rates, SMRs)
Life expectancy
Life years lost
Quality of life
Numerous QoL measures (generic and specific)
SF-36, Nottingham Health Profile, Guttman Scale, Rotterdam Symptom Checklist, Hospital Anxiety and Depression scale etc….
HEA PTP: M212 Economic Evaluation

10. Process of Benefit Assessment
1. Identification:
2. Measurement:
3. Valuation:
Mortality.
Quality of life.
Measure in natural physical units (eg. number of deaths averted).
Value benefits if appropriate ie. if performing CUA or CBA.
HEA PTP: M212 Economic Evaluation

11. Issues in Assessing Benefits for CEA
1. Efficacy vs effectiveness vs efficiency.
2. Intermediate versus final outcome.
3. Sources of data for CEA.
HEA PTP: M212 Economic Evaluation

12. Efficacy Vs Effectiveness Vs Efficiency
Efficacy = measure of effect under ideal conditions.
Effectiveness = effect under ‘real life’ conditions.
Efficacy does not imply effectiveness
Efficiency = relationship between costs & benefits.
Effectiveness does not imply efficiency
HEA PTP: M212 Economic Evaluation

13. Intermediate Vs Final Outcome Measures
Final = change in health (status) resulting from the
programme.
Intermediate = change in clinical indicator resulting from the programme.
Need to establish causal link between
intermediate and final outcome measure.
HEA PTP: M212 Economic Evaluation

14. Examples of Intermediate Vs Final Outcomes Indicators (PBAC (PBS) Oz)
Condition being Final outcome Surrogate Outcome Indicators
treated indicator
Coronary thrombosis Quality-adjusted Number surviving Number with specified Number achieving coronary
(thrombolysis survival level of left ventricular re-perfusion
function
Stable angina Quality-adjusted Number with Number who can walk Number with adequate
(various interventions) survival acceptable a specified distance relief of pain
quality of life
Asthma Quality-adjusted Number surviving Number with adequate Number achieving a target
(various drugs) survival control of bronchial level of airways functions
hyperreactivity
Depression Quality-adjusted Number avoiding Quality of life (may be Number achieving a target
(various drugs) survival suicide improved by drugs) Hamilton or Montgomery-
Asberg Depression Rating
Scale
Hypertension Quality-adjusted Number avoiding Quality of life (may be Number achieving a target
(various drugs) survival a stroke worsened by drugs) blood pressure
HEA PTP: M212 Economic Evaluation

15. Sources of Effectiveness Data
1. Clinical trials, eg RCT’s.
2. Epidemiological studies, eg cohort studies.
3. Synthesis methods, eg meta-analyses.
4. Use of modelling.
HEA PTP: M212 Economic Evaluation

16. Randomised Controlled Trials
‘Gold standard’ - minimal bias and confounding.
Disadvantages:
1. Often establishes efficacy, not effectiveness.
2. Selective subjects used.
3. Limited opportunity to conduct.
4. Limited time horizon.
5. Costly to conduct.
6. Often unethical and/or unfeasible.
HEA PTP: M212 Economic Evaluation

17. Epidemiological Studies
Real life setting - establish effectiveness
Disadvantages:
1. Potential for significant bias and confounding.
2. Causal link can be weak.
HEA PTP: M212 Economic Evaluation

18. Decision Rules: CEA CEA result = CEI (c/e). eg cost per LY gained
Decision rule = adopt lowest CEI
Application = technical efficiency
Qst addressed = “Should we undertake program “X” or
program “Y” to treat condition “A”?
HEA PTP: M212 Economic Evaluation

19. Limitations of Measurements/Need for Valuation
Ambiguity in assessing overall improvement or detriment in health
Allocative efficiency - value of benefits > (opportunity) cost
HEA PTP: M212 Economic Evaluation

20. Valuation Versus Measurement
Value is determined by benefits sacrificed elsewhere (weighted preference)
Valuation requires a trade-off between benefits measurement does not
HEA PTP: M212 Economic Evaluation

21. Methods of Valuing Health
‘Utility’ or ‘preference’ assessment
Quality-Adjusted Life Years (QALYs)
Variants on QALY - Years of Health Life (YHL), Health-Adjusted Person Years (HAPY), Health-Adjusted Life expectancy (HALE)
Healthy-Year Equivalents (HYEs) (based on ‘sequence’ of SG)
Saved-young-life equivalent (SAVE) (based on PTO)
Monetary terms eg WTP
Willingness-to-pay (WTP)
Human Capital
HEA PTP: M212 Economic Evaluation

22. Quality Adjusted Life Years (QALYs)
Adjusts data on quantity of life years saved to reflect a valuation of the quality of those years
If healthy: QALY = 1
If unhealthy: QALY < 1
HEA PTP: M212 Economic Evaluation

23. Qol Profile QL Weighting No Life Years = 15 No QALYs = 11 0 5 10 15
No Life Years = 15
No QALYs = 11
QL Weighting
HEA PTP: M212 Economic Evaluation

24. QALY Procedure
Identify possible health states - cover all important and relevant dimensions of QoL
Derive ‘weights’ for each state
Multiply life years (spent in each state) by ‘weight’ for that state
HEA PTP: M212 Economic Evaluation

25. “Utility” Weight
Utility = satisfaction/well-being - reflects a consumers (weighted) preferences
Utility weights are necessarily subjective - they elicit an individual’s preferences for, or value of, one or more health states.
Must: 1. Have interval properties
2. Be ‘anchored’ at death and
‘good health’
HEA PTP: M212 Economic Evaluation

26. Techniques For Measuring “Utility”
Variety of techniques available, including:
Time Trade off
Person Trade Off
Standard Gamble
Rating Scale
HEA PTP: M212 Economic Evaluation

27. Obtaining “Utility” Weights
Two means of obtaining “utility” weights:
1. Evaluation specific/’holistic’ measures - develop evaluation specific (‘holistic’) description of health state and then derive weight for that specific state directly by population survey
2. Use ‘generic’ or ‘multi-attribute’ instruments - use predetermined weights, based on combination of dimensions of health yielding a finite number of health states/values
HEA PTP: M212 Economic Evaluation

28. Evaluation Specific/‘holistic’ Measure
Advantages: 1. Sensitive
2. Account for wider QoL (eg process, duration, prognosis)
Disadvantages 1. Cost and time intensive
2. Lack of comparability
HEA PTP: M212 Economic Evaluation

29. Generic (MAU) Instruments
Advantages: 1. Supply weights “off the shelf”
2. Comparability
Disadvantages: 1. Insensitive to small changes in health
2. Dimensions may not be
sufficiently comprehensive
3. Weights may not be
transferable across groups
HEA PTP: M212 Economic Evaluation

30. Some Other Issues
Choosing respondents for utility estimation - whose values count?
What constitutes a ‘correct’ health state description?
What is the appropriate ‘measurement’ technique?
Aggregation of values?
Biases - ageist, life enhancing versus life-saving etc.
HEA PTP: M212 Economic Evaluation

31. Decision Rules: CUA CUA result = CEI (c/e). eg cost per QALY gained
Decision rule = adopt lowest CEI
Application = 1. technical efficiency
2. possibly allocative efficiency within
health care sector
Qst addressed = 1. Should we undertake program “X”
or “Y” to treat condition “Z”?
2. Should we treat condition “A” or “B”?
HEA PTP: M212 Economic Evaluation

32. Decision Rules: Issues
1. Perspective - Health Care Sector
- Purchaser/Provider
- Societal
2. Comparator
3. Budget constraint/indivisibility
4. NPV vs BCI
5. Limited nature of economic evaluation
HEA PTP: M212 Economic Evaluation

33. CUA and Rationing
Market system - price mechanism establishes equilibrium (efficient allocation)
Non-market system - absence of price as allocative tool leads to other, non-price, techniques
Issue is one of: (i) philosophical basis for rationing; and (ii) applied technique for rationing
HEA PTP: M212 Economic Evaluation

34. Methods of Explicit Rationing
(Coast et al, Priority setting: the health care debate, John Wiley, 1996)
HEA PTP: M212 Economic Evaluation

35. Explicit Rationing: Technical Methods
Single principle
Little distinction between setting priorities at different levels
Examples
maximising health gain
need-based rationing
lotteries
age-based rationing
HEA PTP: M212 Economic Evaluation

36. Technical Method: ‘QALY League Tables’
Economic evaluation produces information on cost-effectiveness
If using comparable outcomes (eg QALY) can ‘rank’ according to c/e
Can use resultant ‘league table’ to allocate resource to most c/e first
HEA PTP: M212 Economic Evaluation

37. League Tables: Handle With Care!
Studies show differences in methodology
choice of discount rate
method of estimating utility values
range of costs included
choice of comparator
Requires consistent methodology, ‘admission criteria’ for inclusion, applicability in local decision context
HEA PTP: M212 Economic Evaluation

38. The Oregon Plan
decision to stop funding for organ transplantation
Oregon Health Services Commission begins work
List 1
List 2
plan begins
HEA PTP: M212 Economic Evaluation

39. Oregon List Version 1 Efficiency principle
1600 condition/treatment pairs
Cost/QALY gained
social values
outcome
cost
HEA PTP: M212 Economic Evaluation

40. Oregon List Version 1
“... looked at the first two pages of that list and threw it in the trash can”
“... the presence of numerous flaws, aberrations and errors”
(Harvey Klevit, member, Oregon Health Services Commission)
HEA PTP: M212 Economic Evaluation

41. Oregon List Version 2 Equal treatment for equal need
709 condition/treatment pairs
Method:
Development & ranking of categories
Ranking C/T pairs within categories
Public preferences
Outcome
Professional judgement
HEA PTP: M212 Economic Evaluation

42. Oregon List Version 2 Top Five C/T pairs Bottom Five C/T pairs
1 Pneumonia - medical
2 Tuberculosis - medical
3 Peritonitis - medical/surgical
4 Foreign body - removal
5 Appendicitis - surgical
Bottom Five C/T pairs
705 Aplastic anaemia - medical
706 Prolapsed urethral mucosa - surgical
707 Central retinal artery occlusion paracentesis of aqueous
708 Extremely low birth weight, < weeks - life support
709 Anencephaly - life support
HEA PTP: M212 Economic Evaluation

43. Summary 1. Benefits must be assessed to establish efficiency.
2. Breadth and depth of benefits measured (& valued) varies across type of economic evaluation.
3. Difference between valuation and measurement.
4. Debate on role of CUA (& CEA) in allocative efficiency
5. Beware ‘league tables’!
HEA PTP: M212 Economic Evaluation