1. Do we need economics in medicine?

2. Edmund Burke, 1790 dcist.com/2007/12/10/revisiting_edmu.php “…the age of chivalry is gone. That of sophisters, economists, and calculators has succeeded; and the glory of Europe is extinguished forever”

3. Important Similarities Between Physicians and Economists Realistic approach to life’s problems Reliance on quantitative information Often must make difficult choices in the face of uncertainty Good decisions require comparing benefits and risks (costs) Victor R. Fuchs. WHAT SHOULD PHYSICIANS KNOW ABOUT HEALTH ECONOMICS, 2002

4. Big Difference Between Physicians and Economists Physicians are usually concerned with an individual patient Economists are usually concerned with large aggregations: organizations, industries, governments, society as a whole

5. Health economics? Health economics lies at the interface of economics and medicine and applies the discipline of economics to the topic of health

6. Why is it important to look at economics in health? Health resources are finite A choice must be made about which resources to use for which activities Decision making process has to be based on the valid and reliable information, and on the correct decision making principles

7. But, … Economics is not primarily about saving money It is about using scarce resources as efficiently as possible Victor R. Fuchs. WHAT SHOULD PHYSICIANS KNOW ABOUT HEALTH ECONOMICS, 2002

8. Components of health economics If we look beyond health, we must incorporate pure economics, finance and insurance, industrial organization, labour economics, public policy (and finance), sociology, and statistical methods into our thinking. Within the health area, the disciplines of health services research, medicine, medical ethics, psychology and public health / epidemiology

9. Measurement Are there unmeasurable things? How do we measure health? How do we measure wealth? (Are the two linked?) Can we measure pain?

10. Derivation Can each measurement be given an economic value? Can everything be given a value? Can we estimate a value of a human life?

11. Example Croatian Institute for Health Insurance Board for Medicines Decides upon which medications are to be funded by the CIHI Which drugs get a priority? Which are rejected?

12. Indicators We can define an indicator for everything we measure E.g. 5-year survival after surgical treatment, PTCA and drug treatment, or number of days spent in hospital We can compare costs of all three treatments, and then perform all analyses to define the best option for every patient

13. Indicators Indicators have to be relative or adjusted Comparison of costs of the primary care in the rural and urban region? In the region of the town with higher socioeconomic status and slums? Comparison across countries? Central idea in quality assessment and improvement

14. Economic evaluation Reality of opportunity cost Useful alternatives compete for resources Making choices is sometime unpleasant Options for colorectal cancer screening –Fecal blood test –Barium enema –Sigmoidoscopy –Colonoscopy Is it worth the extra money?

15. What is economic evaluation? A comparative analysis Evaluating alternative courses of action Examining both costs and consequences –Identify –Value –Measure –Compare

16. Economic evaluation considers assessment of intervention effects in economic terms, which is often of greatest interest to fund allocators Intervention evaluation involves two measures;  the health effects or effectiveness of the intervention  the value or efficiency of the effects Economic evaluation expertise can lie outside the competencies of an individual public health nutritionist however simple economic assessment tools can be applied Evaluation Economic Evaluation

18. Characteristics of Economic Evaluation Economic evaluation involves identifying, measuring and valuing both the inputs (costs) and outcomes (benefits) of the intervention/s there are two broad areas of economic measurement;  Provider or narrow perspective - consider inputs (costs) and outcomes (benefits), and compares both aspects across alternative interventions  Societal perspective - include only some elements of inputs and outcomes The provider approach has limitations because ranking interventions in terms of value for money may be very different if the analysis includes all costs and benefits Economic Evaluation

19. Types of Economic Evaluation Tracing all inputs and finding valuations for all resources used can be difficult but should not deter intelligent estimates being made Evaluations that consider both outcomes and resources use are full economic evaluations – there are four distinct types: 1.Cost-minimisation analysis Involves comparison between two or more alternative interventions whose outcomes are assumed to be exactly the same Assumes all consequences of the alternative interventions are the same Generally not recommended Economic Evaluation

20. Types of Economic Evaluation 2. Cost-effectiveness analysis Most common type of economic evaluation in health care Benefit is usually measured as a quantifiable unit  behavioural - fruit and vegetable intake  health outcome (glucose level) Criticised for failing to recognise the broader benefits of PHN interventions however quantification of measures is required for analysis Cannot be used to compare interventions - most suitable when interventions with the same health aims are being compared Economic Evaluation

21. Types of Economic Evaluation 3. Cost-utility analysis Uses a common measure of outcome to enable comparison between a range of interventions - between PHN intervention, or between PHN intervention and treatment approach Benefits or outcome are expressed as a measure that reflects how individuals value or gain utility from the quality and length of life:  QALYs (quality adjusted life years)  DALYS (disability adjusted life years)  HYE (health year equivalents Can identify only relatively large changes in individual health status and can put PHN interventions at a disadvantage Economic Evaluation

22. Types of Economic Evaluation 4. Cost-benefit analysis Measures all outcomes in monetary terms Calculates monetary values of health benefits and costs to conclude if one side is greater than the other Commonly expressed as cost-benefit ratio Useful for comparing interventions with many diverse outcomes - most appropriate for economic evaluation of inter-sectoral interventions Economic Evaluation

23. Conducting a thorough economic evaluation required specialised health economics expertise and can be a rather resource intensive process. Ideally economic evaluation should only be undertaken if the benefits of improving efficiency of health resources outweigh the costs of evaluation. There is no consensus of opinion of which method is best and the decision is likely to be limited to the type and quantity of information available, and time and resource restraints. Choose a method that is most appropriate to the data available. Although funding agencies financing PHN interventions will be interested in the economic benefit from an organisational perspective most agencies would prefer to promote the societal benefits the intervention they funded had, hence taking a societal perspective to economic evaluation is preferred.

24. Process of Economic Evaluation To undertake a high-quality economic evaluation a multidisciplinary team containing both economists and public health nutritionists is required The main steps to consider for an economic evaluation are:  Defining the economic question and perspective  Determining the alternatives to be evaluated  Choosing the evaluation design  Identifying, measuring and valuing the costs  Identifying, measuring and valuing the benefits  Adjusting costs and benefits for the differential timing  Measuring incremental costs and benefits  Putting the costs and benefits together  Testing the sensitivity of the results  Presenting the results Economic Evaluation