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Economic evaluation of health care

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Economic evaluation in healthcare
College 1 – Introduction to HTA and economic evaluation in health
care
 Define Health Technology Assessment (HTA) and Health Economics
 Explain why health economic evaluations are performed
 Explain the basic concepts of health economic evaluation
 Compare the different types of health economic evaluation

What is HTA?
“HTA is a multidisciplinary process that uses explicit methods to determine the value of a health
technology at different points in its lifecycle. The purpose is to inform decision-making in order to
promote an equitable, efficient, and high-quality health system.”
Evaluation of health technology from a variety of perspectives in order to inform health policy. The
perspectives: social sciences, medicine, epidemiology, demography, economy, health law, medical
ethics, organisational science.

What is Health Economics?
Evaluation of health technology in terms of costs and health outcomes; more specific: health
economics (HE)




Goal of health economics (HE)
 Goal of HE is
o Balance care demand and care provision
o Support decisions on investment, designing, research, pricing, market access and
introduction into the benefit package
 By means of objective evaluation of health technology
o Prevention, diagnostics, therapy, recovery, palliative care,…
o Safety and efficacy
o (Future) impact on (clinical) outcomes
o (Future) impact on non-clinical patient outcomes
o (Future) costs (cost savings)

Why do we need economic evaluation in health care?
 Budgets in health care are constrained
o Funded by government mostly
o Insurers – related to health care insurance
o Out of pocket payments of patients (e.g. birth control)
 Every Euro can only be spent once
o Money spent on individual A cannot also be spent on individual B
 Central theme in health care economics:
o How do we get the “biggest health bang for our buck”?

,Health care innovations  new high cost medical products
Health care spending does not show it all
It is not just about how much we spend; budgets are limited in any case
It is also how we spend it (on what); efficiency, “doelmatigheid”, cost-effectiveness

Health economic evaluation
History and theoretical background
A brief history of economics in health care:
 1963: Kenneth Arrow’s paper “Uncertainty and the Welfare Economics of Medical Care”
American Economic Review, 53 (5), 941-73
 70s: international as part of health technology assessment
 80s: introduction of expensive treatments such as heart and liver transplants and IVF
o Dunning’s funnel
o Report ‘Ziekenfondsraad’ 1985: “Grenzen aan de groei van het verstrekkingenpakket
 90s: Fund for the development of medical care (36M guilders, 1988)
o Systematic studies into cost-effectiveness of advanced expensive new medical
technologies
 2005: lawful obligation for pharmaceutical company to submit an economic evaluation when
requesting reimbursement for a new technology
o Show added value

Relevance: to inform choices
 Development of new health care technologies, balancing health care demands and health
care provision
o Health care budgets are limited
o Care demands and expectations of patients are unlimited
 Optimal use of scarce health care resources
o Economic evaluation assumes efficient and fair allocation of constrained resources to
maximise (societal) health benefits
o Assume individual people and society are utility maximisers (relative satisfaction,
health outcomes) and aim to achieve the greatest benefit for the greatest number

Pareto Principle
 PARETO efficiency: any change in resource allocation leads to losses and gains. In the
30’s,compensation principle added to the theory, the people who lose are compensated by
the gains of others.
 Many health economists assume the pareto efficiency to be a criterion. That is, the loss of
some people is compensated with gains of others. From a societal perspective! Not an
individual.
 To measure the net benefit we need one measure of utility across diseases and
interventions.

Opportunity costs; What do we forgo when we make that choice?
 In microeconomic theory, the opportunity cost of a choice is the value of the best alternative
forgone, in a situation in which a choice needs to be made between several mutually
exclusive alternatives given limited resources.
 Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that
would be experienced by selecting the second-best choice available.

,Every euro counts
 Increasing the national healthcare budget will reduce budgets for: education, social welfare,
infrastructure, military defense,…
 In any case, there will never be enough budget to fulfil all individual care needs
 Suboptimal use of the healthcare budget means a loss of money = loss of health

Fundamentals and types of economic evaluation
Health economic evaluation = systematic evaluation of costs and effects
 Comparative analysis (≥ 2 alternatives: interventions, strategies, policies)
 Incremental (cost-effectiveness) analysis
 Extra cost per extra unit of benefit
 Goal: systematically identify, measure, value, and compare costs and effects (consequences)
of different alternative policies/interventions.
 Within a certain health problem (usually) or over different health problems




Timing
 Ideally after proof of efficacy in research setting
 Ideally before large scale implementation of technology
 Impact on decision making optimal

Typical questions
 Should GPs check the blood pressure of all patients coming in for consultation?
 Should all women get vaccinated against HPV?
 Should all men with prostate cancer receive new and very expensive chemotherapy?
 Should we use new biomarkers in screening for individuals at high risk for CVD?
 Should we use robots for gastrectomy instead of laparoscopic (minimally invasive)
gastrectomy?

Underlying research question
 Is this particular intervention (drug, technology, device, service, healthcare delivery strategy)
valuable when compared with other interventions that could be paid for with the same
budget?
 In other words: are we happy to spend our healthcare Euros on this particular intervention
instead of on something else?

, Comparator and perspective
 Comparators: systematic identification of all relevant alternative interventions
o Including: ‘do-nothing’/ ‘watchful waiting’ / ‘active surveillance’
o For example, stop smoking counselling program as alternative to chemo in
lungcancer patients
 Perspective: determines the outcome of the economic evaluation
o Patient, hospital, insurer, society
o For example, telemonitoring health failure compared to regular hospital check-ups:
costeffective from societal perspective, not cost-effective from hospital perspective

Different types of studies to answer different questions




Cost of illness (COI) study & budget impact analysis (BIA)
COI: identify and measure all the costs of a particular desease.
 Outcome: total cost burden of a particular disease (to society).
o Sometimes called burden of illness (BOI), but this implies also health burden.
BIA: Analysis of the financial consequences of the use of an alternative
intervention compared to the current situation for a certain budget holder (for
example: hospital, health insurer, the Ministry of Health)
 What extra money is required?

Two main approaches
 Trial-based analysis (empirical study)
o Costs and effects are measured simultaneously in a (randomized) clinical trial
 Model-based analysis
o Synthesis of evidence on costs and effects from a variety of sources in a decision-
analytic model
o Explanation of the choices, evidence and uncertainty, and their consequences

Types of economic evaluation
 Cost Minimisation Analysis (CMA)
o Assumption: there are no differences in effectiveness, effects are considered to be
exactly the same for all patients (no heterogeneity)
o If true, comparison of costs across interventions to determine the cheapest
o But: this is hardly ever a valid assumption
o Costs and effects should be analyzed simultaneously not in sequence
o So: CMA is not the analytical technique of choice!
 Cost Effectiveness Analysis (CEA)
o Can express effects in any measure of interest for the intervention under study.
o Stop smoking campaign: number of quitters
o Obesitas prevention program: weight loss in kg
o Vaccination: cases of infectious disease averted

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