1. Cost-Effectiveness & Resource Allocation Wisconsin Public Health and Health Policy Institute May 26, 2005

2. For consideration… How should the health policy community balance competing priorities of: Maximizing health Minimizing budget Should prevention be thought of differently from other types of health care? What is the role for the public in this discussion?

3. Life Expectancy at Birth

4. Infant Mortality Rates Infant Mortality Rates (per 1,000 Live Births) By OECD Country in 2000

5. Percentage of GDP Spent on Health Care in 1990 and 2000

6. Heart (26)68.6 1.130.3 Pulmonary (25)37.5 41.920.6 Psychiatric (25)21.1 59.219.7 Cancer (18)41.9 27.430.7 Infectious ( 6)95.2-17.522.3 Percent change in spending attributable to: Increase cost/ Rise in treated Increased treated case prevalence population Reasons for Changes in Medical Care Spending 1987-2000. Thorpe, K et al,. Health Affairs, 2004 Disease and $s (in billions )

8. Cost-Effectiveness Analysis ( aka….. value for money )

9. Costs Costs include: Care by health professionals Labs and X-Rays Hospital/facility charges Medications Other expenses related to illness

10. Effectiveness in Cost-Effectiveness Analysis An effective treatment or intervention does one or both of the following : Increase how long people live Improve or maintain how well people feel

11. Quality-adjusted life years: A measure of effectiveness (Life expectancy) (quality of life)=QALYs

12. Health-related Quality of Life 0 1 Dead Perfect health

13. Calculations: Quality-Adjusted Life Years If, HRQL= 0.7 And, A treatment gives 10 extra years of life (@ 0.7 per year ) Then…. People receiving the treatment gain Seven Quality-Adjusted Life Years (7 QALYs)

14. A QALY is a QALY is a QALY #People HRQL LE = QALYs Saves 100 x 0.8 x 50 = 4000 Lives Improves10,000 x 0.1 x 4 = 4000 HRQL

15. The cost-effectiveness of one thing compared to another… Cost treatment A – Cost treatment B Effectiveness treatment A – Effectiveness treatment B = COST per QALY

16. For example… Cost Life Expectancy HRQLQALYS Group A$80,0002 Years X.6 = 1.2 Group B $ 4,000 1 Year X.8 = 0.8 Cost-effectiveness: $80,000 - $4,000 = $76,000 = $190,000/QALY 1.2 – 0.8 0.4

17. What’s a “Good” Buy? “Expensive” more than 100K/QALY “Reasonable” 50K/QALY “Very Efficient” less than 25K/QALY

18. Cost-Effectiveness Analysis Some Questions…..  Should “life-saving” be placed on the same mathematical scale as “quality improving”?  Is it appropriate to consider cost per QALY when diseases are immediately life-threatening?  How would we justify discriminating against people who have diseases that are “inefficient” to treat?  Should QALYs count the same regardless of whether they go to young or old?  The not so sick, versus the very sick?  When prevention is as “cost-effective” as cure, which gets priority?

19. Condition/Treatment Cost per QALY Treatment for Erectile Dysfunction$6,400/QALY * Physician Counseling for Smoking $7,200/QALY Total Hip Replacement$9,900/QALY * Outreach for Flu and Pneumonia $13,000/QALY Treatment of Major Depression$20,000/QALY Gastric Bypass Surgery$20,000/QALY Treatment for Osteoporosis$38,000/QALY * Screening For Colon Cancer $40,000/QALY Implantable Cardioverter Defibrillator $75,000/QALY Lung-Volume Reduction Surgery$98,000/QALY Tight Control of Diabetes$154,000/QALY * Treating Elevated Cholesterol ( + 1 risk factor) $200,000/QALY Resuscitation After Cardiac Arrest$270,000/QALY Left Ventricular Assist Device$900,000/QALY COST/QALY: Selected Medicare Services

20. For consideration… Should prevention be thought of differently from other types of health care?

21. Condition/TreatmentCost per QALYCost per person Number of people to treat TOTAL COST Erectile Dysfunction$6,400/QALY$4805 million3 billion Physician Counseling for Smoking$7,200/QALY$1284 million0.5 billion Total Hip Replacement$9,900/QALY$31,000250,0007 billion Outreach for Flu and Pneumonia $13,000/QALY$17.5020 million0.35 billion Major Depression$20,000/QALY$2,0002 million4 billion Gastric Bypass Surgery$20,000/QALY$81,00070,0006 billion Treatment for Osteoporosis$38,000/QALY$9505 million5 billion Screening For Colon Cancer$40,000/QALY$3508.4 million3 billion Implantable Cardioverter Defibrillator $75,000/QALY$35,00050,0001.75 billion Lung-Volume Reduction Surgery$98,000/QALY$50,00020,0001 billion Tight Control of Diabetes$154,000/QALY$14004.8 million7 billion Elevated Cholesterol$200,000/QALY$13508 million11 billion Resuscitation After Cardiac Arrest$270,000/QALY$45,000130,0006 billion Left Ventricular Assist Device$900,000/QALY$100,000100,00010 billion Estimated costs of treating selected conditions. Gold, et al, 2005 (unpublished)

23. SUNDAYBUSINESS February 27, 2005, Sunday ECONOMIC VIEW: How to Save Medicare? Die Sooner By DANIEL ALTMAN (NYT) 1103 words Late Edition - Final, Section 3, Page 1, Column 5

24. We are such stuff as dreams are made on, and our little life is rounded with a sleep… The Tempest Shakespeare, W. et al

25. For consideration… What is the role for the public in this discussion?

26. Health, Defense and Education %of GDP 3.6