Fundamentals of health economics: - PowerPoint Presentation

Slide1

Fundamentals of health economics: A user guide to the Disease Atlas

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Table of Contents:

1) Introduction to health economics

2) User guide to the Disease Atlas

Why is health economics relevant to healthcare professionals?

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1. Beecroft. BMJ Opinion 2016, https://blogs.bmj.com/bmj/2016/02/29/claire-beecroft-why-all-medical-students-need-an-education-in-health-economics/;

2.

Kernick

. Postgrad Med J 2003;79(929):147–150;

3. Jain. Perspect Med Ed 2016;5:45–7

”

“…it is time to accept that basic health economics should form part of the core medical curriculum – it is no longer a ‘niche’ topic for those with interest in this aspect of healthcare”

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”

“An understanding of some basic economic principles is essential for all practitioners not only

to understand the useful concepts the discipline can offer but to appreciate its limitations and shortcomings”

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”

“Political expectations are

growing that hospital doctors will get to grips with finances and be more involved in budget management and commissioning

“But for many doctors a role in managing budgets or improving efficiency seems an overwhelming task, without much background knowledge, or training”

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1) Introduction to health economics

Economics is based on the idea that there will never be enough resources to satisfy the demand for them – the principle of

scarcity

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This means that, in healthcare systems, the growth of healthcare resources is outstripped both by the demand for those resources and by the number and cost of treatment options that become available,

1,2

driven by several factors:

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Demographic change; as individuals live longer, there is a greater proportion of elderly people requiring healthcare, further constraining welfare systems

Improvements in health technology mean that more pharmacological, surgical, and diagnostic treatments are available

The expectations individuals have of a healthcare system rise over time

Time

Resources available

Demand for healthcare resources

Number of intervention options

The economics of healthcare

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1.

Kernick

. Postgrad Med J 2003;79(929):147–150;

2. Phillips. Health Economics: An Introduction for Health Professionals. Blackwell, 2005;

3. Drummond. An Introduction to Health Economics.

Brookwood

Medical Publications, 1995

The economics of healthcare

1,2

Demand

or availability

e.g., lost productivity at work, unemployment,

unpaid caregiver time

The costs of healthcare

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Treatment options use healthcare resources, in the form of direct and indirect costs:

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Direct costs relate directly to a treatment,

e.g., drug acquisition costs, doctor and nursing staff time

Indirect costs relate to losses to society,

e.g., lost productivity at work, unpaid caregiver time

Indirect costs are not always considered, and there is a level of debate about their relevance; an individual’s work is typically covered in their absence by another person, so is there really a loss to society when the individual is off sick?

2

Sometimes there are multiple treatment options available, each with their own benefits. In this case,

a choice has to be made

about which treatment option to use

1. Phillips. Health Economics: An Introduction for Health Professionals. Blackwell, 2005;

2.

Drummond. An Introduction to Health Economics.

Brookwood Medical Publications, 1995Direct

costs

e.g., drug

costs

Indirect costs

Societal costs

e.g., homelessness, incarceration

Weighing up costs and benefits of treatments

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All treatments are associated with a cost

1,2

Resources are allocated to one healthcare area at the expense of investment in another; e.g., if more money is spent on cancer treatment, then that same money cannot be spent on treating mental

disorders

1,2

To be able to answer the question, “

Is the increase in cost between different treatments worth paying?

” some measure of the benefits of each drug is needed, so that the treatment

costs

can be considered against the

benefits

when comparing alternative treatment options

Measures of benefit include years of life saved, events averted1 (e.g., psychotic relapse), and number of symptom-free days, DALYs?1.

Kernick. Postgrad Med J 2003;79(929):147–150; 2. Phillips. Health Economics: An Introduction for Health Professionals. Blackwell, 2005

Benefit

Cost

-

+

Feasibility

Cost–effectiveness comparisons

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When the treatment

costs

are known and a metric for

benefit, or effectiveness

, has been established, treatment options can be compared and analysed on a cost–effectiveness plane

1It might be clear that one treatment is more effective and less costly (i.e., dominant) than an alternative. Sometimes, the situation is less clear-cut; an alternative treatment can be more effective and also more costly

1,2Discerning the value of alternative treatment options requires health economic evaluations to be performed

21. Phillips. Health Economics: An Introduction for Health Professionals. Blackwell, 2005;

2. Kernick. Postgrad Med J 2003;79(929):147–150

Cost

Benefit (effectiveness)

The new treatment has greater benefits,

but is more costly

The new treatment has fewer benefits,

and

is also more costlyThe existing treatmentis said to ‘dominate’

The new treatment has fewer benefits,

but is less costly

The new treatment has greater benefits

and

is less costly

The new treatment is

said to

‘dominate’

The cost–effectiveness plane

1

Types of health economic evaluations

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DALY=disability-adjusted life year; QALY=quality-adjusted life year

1.

Areda

et al.

Br J

Pharmaceut Sci 2011;47(2):231–240; 2. Drummond. An Introduction to Health Economics. Brookwood Medical Publications, 1995;3. York Health Economics Consortium website.

https://www.yhec.co.uk/glossary/budget-impact-analysis

Cost–minimisation analysis (CMA)

1

Assuming that two treatments have the same, or similar, effectiveness, a CMA simply asks: which one of them is cheaper?

Cost–benefit analysis

(CBA)

1,2

Costs and effectiveness are both measured in monetary terms; the relationship between the costs of a treatment and the financial benefits of that treatment are estimated – do the benefits outweigh the costs?

Sometimes, a budget-impact analysis is performed, to see how a new treatment would affect a healthcare budget

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Cost–effectiveness analysis

(CEA)

1,2

Calculates the cost of one treatment versus another per specific benefit in natural units, e.g., years of life saved, or number of symptom-free days

Cost–utility analysis

(CUA)

1,2

Calculates the cost of a treatment versus another per units of mortality and morbidity – typically, the cost of obtaining a ‘year of healthy life’ is calculated, and compared between treatments, expressed as QALYs and DALYs

By considering both mortality

and morbidity, therapies that diminish quality of life but extend lifespan are considered fully

Types of budget-impact models

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Adapted from: York Health Economics Consortium website.

https://www.yhec.co.uk/glossary/budget-impact-analysis;

Lundbeck Institute Campus website. World map, draft;

Mtech

website. http://www.mtechaccess.co.uk/all-services/budget-impact-modelling/;

Silva et al. Epidemiol Serv Saude 2017;26(2):421–424

Budget

-i

mpact model: relative to prevalence

A calculation can be made simply taking the number of patients with a certain illness and multiplying by the cost per patient of that illness. This can be used to gage the impact of the illness on a given budget

Budget-impact

model:

relative to healthcare budgets

The budget impact, calculated above, can be represented as a percentage of the total healthcare budget of a given country, region, province, or municipality

Budget-impact

model:

relative to cost-effectiveness

In the most thorough form of budget impact analysis, a complex model of costs, benefits, and the value of improvements to patients are used to inform decisions about whether to reimburse a particular therapy, or about a particular disease area, based on the lowest

cost-effectiveness ratio given a budget constraint

Schizophrenia

:

$10 million, 1.7% impact

Total budget: $600 million, 100%

2) User guide to the Disease Atlas

Incidence and prevalence

1. Oxford. Concise Colour Medical Dictionary. 4

th

edition, 2007

Prevalence

All cases (8)

1,000

=0.8%

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Incidence is a measure of morbidity based on the number of new events (such as episodes of an illness, or occurrence of a disorder) in a given time period,

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usually expressed as a rate: number of new events per 1,000 of the population, or as a percentage

Prevalence is a measure of morbidity based on the current sickness of a population,

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usually expressed as a rate: number of affected individuals per 1,000 of the population, or as a percentage, or as a raw number representing the total number of cases in that population

Incidence

2 cases

in a year

1,000

=0.2%

per year

Perfect health:

0.00

Measles:

0.15

Tuberculosis:

0.27

Respiratory tract infection:

0.28

Femur fracture: 0.37

Parkinson’s disease: 0.39a Schizophrenia: 0.53

MDD: 0.60a

Alzheimer’s disease:

0.64Spinal cord injury: 0.73

Terminal cancer: 0.81

Health utility scores

Health utility scores (disability weights) can be generated using several interview and questionnaire methods, including the examples shown here

113

a

Disability

weights are presented for untreated condition; MDD=major depressive disorder

1. Phillips. Health Economics: An Introduction for Health Professionals. Blackwell, 2005; 2.

Prüss-Üstün

et al. Introduction and methods. Assessing the environmental burden of disease at national and local levels. WHO, 2003; 3. WHO. Global Burden of Disease 2004 Update. WHO, 2008

Example disability weights

2,3

1. Standard gamble

1

Individuals are presented with a choice between a certain health state (e.g., the current state), or a gamble with one better (e.g., perfect health) and one worse (e.g., death). The odds are adjusted until the individual takes the gamble, e.g., a 10% chance of dying against a 90% chance of being cured back to perfect health

2. Time trade-off

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Individuals are asked how many years of perfect health they would trade for their life expectancy in their current health state – what proportion of their life they would sacrifice to be cured of a certain condition

3. Visual-analogue rating scales

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Individuals are asked to mark along a scale, where a certain health state lies:

The

worst

health you can imagine

The

best

health you can imagine

100

90

80

70

60

50

40

30

20

10

0

X

QALYs and DALYs (I)

A QALY is the product of years of life lived, and the health utility score associated with a health state:

1,2

A year of perfect health is 1 QALY, a year in a health state rated 0.5 (half perfect health) is 0.5 QALY, and 5 years in the 0.5 health state is 2.5 QALYs

1,3

1 QALY = 1 year of perfect health

1

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A DALY is the sum of the years of life lost (YLL) due to premature death, and years lived with disability (YLDs):

41 DALY = 1 lost year of healthy life5

DALY=disability-adjusted life year; HRQoL=health-related quality of life; QALY=quality-adjusted life year; YLD=years lived with disability; YLL=years of life lost1. Sassi. Health Policy Plan 2006;21(5):402–408; 2. Gold et al. Ann Rev Public Health 2002;23:115–134; 3.

Phillips. Health Economics: An Introduction for Health Professionals. Blackwell, 2005; 4. Prüss-Üstün et al. Introduction and methods. Assessing the environmental burden of disease at national and local levels. WHO, 2003; 5. Murray & Lopez. The Global Burden of Disease. WHO, 1996

YLL

YLD

+

YLL = N x L

Where N is number of deaths,

L is standard life expectancy

YLD = I x DW x L Where I is number of incident cases,

DW is the disability weight, and

L is average duration of disability

Years of life

Utility score

x

QALY

1,2

More individual-focussed

1 – Full health

0 – Death

Health state is rated, irrespective of disease

No adjustments are made to the values

DALY

2,4

More population-focussed

0 – Full health

1 – Death

Specific disease or condition is rated

Adjustments are made, e.g., for age

QALYs and DALYs (II)

QALYs

The area under this curve is the QALYs accumulated by the person over this portion of his or her lifetime – the area is approximated by summing the areas of the rectangles

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DALYs

Total DALYs – the years lost from an ideal lifetime living to the maximum life expectancy in full health – are approximated by summing the areas of the rectangles above the curve

Adapted from: Gold et al. Ann Rev Public Health 2002;23:115

–

134

Years

Health-related quality of life

Death

Years

Degree of disability

Life expectancy

Death

0

1

1

0

How DALYs work in practice for an individual

This is John

He is a Canadian

man, and was born in 1940

He developed Alzheimer’s

disease (AD) at the age of 66

In 2012, he died aged 72

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A DALY is the sum of the years of life lost (YLL) due to premature death, and years lived with disability (YLDs):

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The WHO associates AD with a utility of 0.6 (in other words, a utility loss of 0.4)1 throughout the 6 years that John lived with ADYLL

– the mortality part of the DALY is 8 (because John died aged 72 and not aged 80,a a difference of 8 years)YLD – the morbidity part of the DALY is 3.6 (6 x 0.6 = 3.6)This is a total of 11.6 DALYs – 11.6 years of healthy life lost

a

80 years was the life expectancy of a Japanese male, which is used as the male benchmark for DALYs2AD=Alzheimer’s disease; DALY=disability-adjusted life year; WHO=World Health Organization; YLD=years lived with disability; YLL=years of life lost1. Prüss-Üstün et al. Introduction and methods. Assessing the environmental burden of disease at national and local levels. WHO, 20032. Murray & Lopez. The Global Burden of Disease. WHO, 1996

YLL

YLD

+

Direct costs

Medical direct costs:

Physician visits

Hospitalisation costs

Pharmaceuticals

Non-medical direct costs:

Social services

Special accommodationCosts incurred by the family (e.g., home

modificationsa)

Indirect costsLost productivity due to absenteeism, presenteeism, or early retirementInformal care

Disability payments

Cost per patient17

aSometimes

considered within indirect costsAdapted from: ADI World Alzheimer Report 2015; Bovolenta et al. Clin Interv Aging 2017;12:2095–2108; Greenberg et al. J Clin Psychiatry 2003;64(12):1465–1475; Gustavsson et al. Eur Neuropsychopharmacol 2011;21:718–779; Jin & Mosweu

. Pharmacoeconomics 2017;35(1):25–42; Kowal et al. Mov Disord 2013;28(3):311–318; Mudiyanselage et al. Parkinsons Dis 2017;2017:5932675; Okumura & Higuchi. Prim Care Companion CNS Disord 2011;13(3):PCC.10m01082; Teoh et al. Neuropsychiatr Dis Treat 2017;13:1979–1987; Wu et al. J Clin Psychiatry 2005;66(9):1122–1129; Yang & Chen.

Parkinsons Dis 2017;2017:8762939; Zhai et al. Int J Ment Health Syst 2013;7(1):26; Zhang et al. Neuropsychiatr Dis Treat 2016;12:941–949; Zhao et al. Eur J Neurol 2011;18(3):519–526

Reporting of the ‘cost-per-patient’ metric varies depending on how the underlying analyses have been designed,

which may bring uncertainty in making cross country comparisons

For example, ‘direct’ costs may consider several of many different parameters; ‘indirect’ costs may, or may not, be included

It is important to bear this in mind when comparing cost-per-patient values using tools such as the Lundbeck Institute Disease Atlas

Example: $20,000 per patient, prevalence 0.2%, population 50,000 people

The total prevalence of the condition in the whole population is:

50,000 x 0.002 = 100 individuals

The budget impact is this prevalence multiplied by the cost per patient

100 x $20,000 =

$2 million

Budget impact

To calculate the impact that a particular illness has on a healthcare budget, the prevalence of that illness is multiplied by the estimated cost per patient

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Cost per

patient

Total

prevalence

x

Example: a budget impact of $2 million

and a total budget of $20 million

This means that 5% of the healthcare budget is spent on this particular illness

Disease investment

Budget impact is usually presented as a proportion of the total healthcare spend, by dividing the budget impact by the annual healthcare budget

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Budget impact = $2 million

Total budget

Budget impact

$2 million

$20 million

= 5%

(

)

x100

Total healthcare budget

Summary

Health economics provides useful insights into how healthcare can be organised and financed, and provides frameworks to address the values of different interventions in a explicit and consistent manner

1

QALYs and DALYs provide a common currency, formalising the effect of a illness or a treatment on the quality and quantity of an individual’s life

2

The Lundbeck Institute Campus Disease Atlas is an interactive tool that can be used to display and compare health statistics for certain conditions, by region and country:

3

Prevalence – the proportion of a population that experience an illnessDALYs – a measure of disease burden expressed as years of healthy life lost

Budget impact – the total cost of the disease for all patientsDisease investment – the proportion of the total health care expenditure that is spent on the disease

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DALY-disability-adjusted life year; QALY=quality-adjusted life year1. Kernick. Postgrad Med J 2003;79(929):147–150; 2.

Gold et al. Ann Rev Public Health 2002;23:115–134; 3. Lundbeck Institute Campus website. World map, draft