Economic Evaluations, Briefly…

CHSC 433CHSC 433

Module 6/Chapter 13Module 6/Chapter 13UIC School of Public

HealthL. Michele Issel, PhD, RN

Objectives

To understand the conceptual basis of

economic evaluations

Be able to distinguish among the types of

economic evaluations

Be confident as a participant in a team that

undertakes an economic evaluation

NOT: be fully competent to do on own!

Be a critical consumer

Not all publications and

reports are what they seem

or do what they are titled.

Be a savvy consumer of

economic evaluations…

Types of Economic Evaluations

Cost Description

Cost Analysis

Cost-Effectiveness

Cost-Benefit

Cost-Utility Note: These are not mutually exclusive,

nor the only way to typify economic evaluations.

Which Economic Evaluation to Do?

To formulate the economic evaluation question decide whether:

Are 2 or more programs being compared?

Are cost only, or costs and impact being considered?

Types of Economic Evaluations (Drummond et al, 1997)

Looks at: Impact onlyImpact only Costs onlyCosts only Impact and costsImpact and costs

One One programprogram

Outcome description

Cost description

Cost-impact description

2 or more 2 or more programsprograms

Efficacy or effectiveness evaluation

Cost analysis

Cost-effectivenessCost-benefitCost-utility

Similarity of process

The steps are basically the same

Note: The alternative program can be either the do-nothing option or the “standard treatment”

Terminology to know

Opportunity CostsExternalitiesDiscountingInflationDepreciationSensitivity analysis

Steps in Cost & Effect Evaluations

Define program• Target population, Interventions to be

evaluated, Program goals and objectives

Identify the alternatives to be compared

Develop decision rules• assumptions, definitions

Steps (Continued)

Compute costs related to the program(s)• Resources utilized by program and by

participants• Productivity loss/gain of participants,

family burden, etc

•Adjust for time through discounting, inflation, depreciation

Steps (continued)

Identify and measure program impacts or outcomes

Compute costs of effects Conduct sensitivity analysis

Disseminate findings

Major Types of Cost Analyses

Cost Effectiveness Cost Benefit Cost Utility

Cost-Effectiveness Analysis (CEA)

Asks: Does Program AA have more effect for the dollars expended than does Program BB?

Findings: Specific comparison between programs

C/E ratio is the incremental price to get one unit of effect compared to the alternative

CEA

Effects of the programs are measured in natural or physical units of health effects that are common to both programs

QALYs, DALYs, HLYs can be used

Amount of cost per amount of effect for each program

Low C/E ratio is a good buy

Formula for CEA Ratio

Basically ~

Numerator of Cost $ Denominator of Health Effect Unit

Cost = health care resources + non-health care resources + informal caregiving + participant time

Cost-Benefit Analysis (CBA)

Asks: Are benefits gained worthwhile to society, given the costs?

Findings: Broad, policy implications because of societal focus

Grounded in welfare economics

CBA

Benefits (impacts) measured in market value, willingness to pay (WTP), life expectancy. Measures ALL outcomes.

Value in dollars is used to compare programs. Often compare to the do-nothing option.

Formula for CBA Ratio

Basically ~

Numerator of Cost $Denominator of Benefit $

Benefit $= participant productivity + gain in taxes + reduction in health expenses + etc...

Cost-Utility Analysis (CUA)

Asks: How much is it worth to have a particular state of health?

Findings: Reflect importance; difficult to use for planning or policy because of idiosyncratic nature of preferences.

CUA

Measures Used: Utility measures, weighted utility measures.

Utility refers to a preference for a state of health, which is achieved as an impact from the program.

Utility Determination

Example~ Would you rather have sever, chronic

hypertension or Type II diabetes? Would you rather loose right leg or

left hand? Would you rather loose you left hand

or have Type II diabetes

Formula for CUA Ratio

Basically ~

Numerator of Cost $Denominator of Utility Units

Criteria for Assessing Published Economic Evaluations

(Drummond et al 1997; Gold et al 1996)

FRAMEWORKFRAMEWORK:

Well defined economic question

Description of alternative programs

Effectiveness of intervention(s)

established

Criteria (continued)

DATA and METHODSDATA and METHODS: Costs and consequences/impact identified for

alternative programs Appropriateness of units of measure Credible values for costs and

consequences/impacts Cost adjustments for timing (discounting,

etc) State year and type of currency Software used

Criteria (continued)

RESULTSRESULTS: Sensitivity analysis conducted Graphical presentation of C/E results Any secondary analyses

DISCUSSIONDISCUSSION: Limitations of the study Policy implications Intervention implications

Decision Balance

Economic Evaluations Across the Pyramid

Direct Health Care

Services____________________

Enabling Services___________________________

Population-Based Services___________________________________

Infrastructure Services

Note:

Possible at each level

Precision in cost estimation decreases as move down the pyramid