Schneider Institute for Health Policy Heller School Brandeis University September 2001 1 by Donald S. Shepard, Ph.D. Schneider Institute for Health Policy.

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Schneider Institute for Health Policy Heller School Brandeis University September by Donald S. Shepard, Ph.D. Schneider Institute for Health Policy Heller School, MS 035 Brandeis University Waltham, MA USA Tel: Fax: Web: Monday, Sept 10: Principles of Cost-Effectiveness Analysis

Schneider Institute for Health Policy Heller School Brandeis University September Donald S. Shepard, Ph.D. Schneider Institute for Health Policy Heller School, MS 035 Brandeis University Waltham, MA USA Tel: Fax: Web: Module I September 5, 2001 – October 22, 2001 Cost-effectiveness of health programs In health services and other sectors HS 422f

Schneider Institute for Health Policy Heller School Brandeis University September Practical information Teaching assistant: Administrative assistant: Linda Purrini, Next to library in Heller Cost of packet (including diskette): $6.00

Schneider Institute for Health Policy Heller School Brandeis University September Web page

Schneider Institute for Health Policy Heller School Brandeis University September Overview of topics 1.Principles 2.Measuring effectiveness 3.Applications 4.Policy uses

Schneider Institute for Health Policy Heller School Brandeis University September Types of costs Recurrent costs (one year or less) –personnel cost (faculty and supporting staff ) –materials (copies, etc.) –building upkeep Capital items (greater than one year) –equipment –buildings

Schneider Institute for Health Policy Heller School Brandeis University September Illustrative calculation of costs of PhD program at Heller, based on hypothetical survey of 3 faculty

Schneider Institute for Health Policy Heller School Brandeis University September Impact of PhD program Outputs – number of graduates Outcome – impact of the graduates Graduates: independent funded research projects

Schneider Institute for Health Policy Heller School Brandeis University September Two perspectives on capital costs

Schneider Institute for Health Policy Heller School Brandeis University September Perspective University Student Society

Schneider Institute for Health Policy Heller School Brandeis University September Direct and indirect costs Direct cost = cost of medical care for that condition Indirect cost = all cost outside of the health sector, especially value of lost productivity (morbidity and mortality)

Schneider Institute for Health Policy Heller School Brandeis University September Cost-benefit vs cost-effectiveness Type of cost Cost- effectiveness Cost-benefit analysis DirectIncluded Indirect costCounted in physical terms Counted in monetary terms

Schneider Institute for Health Policy Heller School Brandeis University September Discounting Adjust for differences in timing between costs or benefits. FV = future value PV = present value R = annual interest rate N = number of years FV = PV (1+R) N PV = FV [1/(1+R) N ] Discount factor = [1/(1+R) N ]

Schneider Institute for Health Policy Heller School Brandeis University September Expected cost Cost if event occurs x probability of its occurence

Schneider Institute for Health Policy Heller School Brandeis University September Purchasing power parity