Knowing what you get for what you pay An introduction to cost effectiveness FETP India

Objective this lecture Understand how cost effectiveness studies are conducted

Key areas Types of analysis Conducting a cost effectiveness analysis Generalized cost effectiveness

Cost benefit analysis Concept  Use of dollars as the common metric  No use of health outcome  Results expressed in benefit-cost ratio Advantages  Allows comparisons with non health programmes  Useful when intervention generates non health outcomes Disadvantages  Controversial  Assigns a value to human life

ImpactOutcome Efficiency Progress Effectiveness Relevance Adequacy Public health managerial processes Planning Programming Implementation Programmed resources Allocated resources Inputs Norms and procedures Applications of norms / procedures Process Agreed objectives / targets Achieved objectives / targets Output

Efficiency and effectiveness Efficiency  Relationship between the output obtained and the efforts (input) invested Effectiveness  Degree of attainment of pre-determined objectives of a programme (e.g., in terms of reducing death / disability)

Definition of cost effectiveness analysis Method used to evaluate public health interventions in terms of cost per health outcome No attempt made to assign a monetary value to disease averted Outcome used:  Cases  Deaths  Years of life  DALYs

Cost effectiveness analysis: Relevance Estimates cost per health outcome Provide additional information to decision makers Is not the only criteria to take into account to make decisions

Effectiveness Obtain documented data on effectiveness Measure effectiveness precisely  Meta analysis  Confidence intervals Document assumptions The cheapest way to go to the moon is to jump. However, we don’t do it because it does not work

Cost utility analysis Subset of cost effectiveness analysis Take YLLs or DALYs as outcome

Discounting Reflect time preference Applies to costs Applies to effects Subject to discussion

Conducting a cost effectiveness study 1.Frame the problem 2.Identify interventions 3.Define outcome measures 4.Estimate net costs 5.Estimate effects 6.Compile costs and effects 7.Perform sensitivity analysis

1. Frame the problem Write study question Define economic perspective  Ministry of health  Health system  Societal Chose time frame for intervention  Absorb start up costs Chose analytic horizon for consequences

2. Identify interventions Take the baseline  “Do nothing” scenario Define potential interventions  Describe components  Relate to measurable effectiveness

3. Define outcome measures Intermediate outcomes  Cases identified, treated Final outcomes  Cases prevented  Life saved  YLLs  DALYs Cost utility

4. Estimate costs Cost of the intervention ? Cost of the disease averted  Medical costs  Non medical costs ? Productivity losses Net costs = Cost intervention - Cost disease averted

5. Estimate effects Burden of disease  Incidence of disease  Incidence of complications (natural history)  Utility calculations Effectiveness of intervention  Documented effectiveness estimates  Compliance  Coverage

6. Compile costs and effects Calculation of cost effectiveness ratio  Average  Incremental Can address various options  Coverage  Discounting

7. Perform sensitivity analysis Parameters to examine  Costs ps and qs  Discounting  Effectiveness  Burden of disease Combinations Advanced analysis

Key elements of the report of a cost effectiveness study Study perspective, time frame and horizon Study question Assumptions Description of interventions Identification of relevant costs Cost effectiveness ratios Sensitivity analysis Discussion

Cost effective and cost saving Some interventions have negative net costs Cost saving interventions are:  Uncommon  Subject to distributional effects Cost effective does not mean cost saving Human life is not “cost effective”  Investment is needed to sustain it

Cost effectiveness criteria Not cost effective  Cost per DALY above 3 GDP / capita Cost effective  Cost per DALY under 3 GDP / capita Highly cost effective  Cost per DALY under 1 GDP / capita WHO commission on macroeconomics and health

Cost effectiveness versus burden of disease Cost effective intervention can prevent only a small burden of disease Some large sources of burden of disease may be preventable through non cost effective interventions

Cost effectiveness of various health interventions

Limitations of traditional cost-effectiveness studies Different horizons Different types of costs included Different costing methods Different discounting rates Different outcome measures Incremental approach  Existing interventions not reconsidered One dimension May not address variations by regions Conflicts of interests

The WHO CHOICE project: Generalized cost-effectiveness Identical horizons Standardized approach to including costs Unique costing methods Standardized discounting policy DALY as outcome measures Null case base  Existing interventions reconsidered Multiple dimension Region specific Science dissociated from advocacy

Generalized cost effectiveness: Challenges Recent concept Difficulties in adapting theoretical concepts Resource intensive Single study team (at the moment)

Generalized cost effectiveness: Example of results for the SEAR D region

Other criteria to chose an intervention Feasibility Ethics Equity Sustainability Acceptability

Take home messages Chose cost effectiveness analysis Frame the question right Follow up progress on the generalized cost effectiveness concept