1 Presented by Donald S. Shepard, Ph.D. Schneider Institute for Health Policy Heller School, Room 122A, Mail Stop 035 Brandeis University Waltham, MA Tel: Fax: Web: Brandeis University Nov. 16, 2000 Cost-Effectiveness of health programs Nov. 16, 2000

2 Practical information Teaching assistant: Administrative assistant: Linda Purrini, Next to library in Heller Cost of packet: $4.50

3 Cost minimization 1.Ancestor of cost-effectiveness 2.Goal: find the least expensive approach to generating the same output. 3.Illustrated by the refrigerator costing exercise, in which you attempt to minimize the cost of keeping vaccines refrigerated.

4 Measuring effectiveness Two fundamental policy issues in debating policy: Prediction – what will happen Valuation – an appropriate measure of output Zeckhauser and Shepard (1976) article discusses these issues.

5 Von Neumann – Morgenstern Utility 1 Suppose we have a “good” outcome which has a utility of 1 (e.g. living year in perfect health) Bad outcome has a utility of 0 (e.g. dying at the start of the year) Intermediate outcome (I) has utility of x (e.g. living with a health limitation), x = u(I)

6 Von Neumann – Morgenstern Utility 2 Suppose I is indifferent between probability p of good outcome, and 1-p of bad outcome The utility is von Neumann-Morgernstern if x equals p.

7 Ways of assessing utilities Probability approach – breakeven probability Time tradeoff - breakeven time

8 Time tradeoff Time tradeoff - find the breakeven time Suppose we were to live 10 years with an impaired state, I Instead, we could live Y years with perfect health. Suppose the the value y would make us just indifferent. Then the utility of I is y / 10. E.g., if y is 7, then the utility is 7/10 = 0.70.

9 Burden of disease

10 Assessing utilities in the conservation sector Identify most important attributes, i.e., –Assessing awareness about conservation issues –Assessing behavior of villagers around conservation Develop a way of measuring each Examine the tradeoffs between them

11 Assessing awareness about conservation issues Interview a sample of villagers, with a questionnaire, e.g. “Can you identify a particular endangered species” oIs it good or bad to cut large trees for firewood? oHow can we prevent the cutting of trees? oScale: identify 5 domains about conservation practices, and topics within those domains. Perfect score is a correct answer for all items oWorst: wrong score on all items. 100 questions (score 0 to 100).

12 Assessing behavior of villagers around conservation oSurveying villagers about their self reported behavior oHow many trees were planted during the past year oObserve the number of seedlings oForest protecting behaviors oScale: worst: clear all trees in the area: density is 0 oNo harm: cut no trees. oBest: Raise the density of trees up to 2.5 meter spacing in square pattern oBest brings density up to 1600 trees in 100 m x 100 m. Tree scale: proportion of the maximum possible of 1600

13 Discounting of health impacts Impacts in future years should be discounted, just as money is discounted Discounting arises due to “time preference”: We are anxious to get good things soon. If we have to wait, them “good” is less highly valued now.

14 Discount factors

15 Graph of discount factors

16 Table of DALYs

17 DALYs