Economic Evaluations, Briefly… CHSC 433 Module 6/Chapter 13 UIC School of Public Health L. Michele Issel, PhD, R N

Objectives l To understand the conceptual basis of economic evaluations l Be able to distinguish among the types of economic evaluations l Be confident as a participant in a team that undertakes an economic evaluation l 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 l Cost Description l Cost Analysis l Cost-Effectiveness l Cost-Benefit l Cost-Utility è 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 only Costs only Impact and costs One program Outcome description Cost description Cost-impact description 2 or more programs Efficacy or effectiveness evaluation Cost analysis Cost-effectiveness Cost-benefit Cost-utility

Similarity of process l The steps are basically the same l Note: The alternative program can be either the do-nothing option or the “standard treatment”

Terminology to know Opportunity Costs Externalities Discounting Inflation Depreciation Sensitivity analysis

Steps in Cost & Effect Evaluations l Define program Target population, Interventions to be evaluated, Program goals and objectives l Identify the alternatives to be compared l Develop decision rules assumptions, definitions

Steps (Continued) l 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) l Identify and measure program impacts or outcomes l Compute costs of effects l Conduct sensitivity analysis l Disseminate findings

Major Types of Cost Analyses l Cost Effectiveness l Cost Benefit l Cost Utility

Cost-Effectiveness Analysis (CEA ) A B Asks: Does Program A have more effect for the dollars expended than does Program B? 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) FRAMEWORK FRAMEWORK: l Well defined economic question l Description of alternative programs l Effectiveness of intervention(s) established

Criteria (continued) DATA and METHODS DATA and METHODS: l Costs and consequences/impact identified for alternative programs l Appropriateness of units of measure l Credible values for costs and consequences/impacts l Cost adjustments for timing (discounting, etc) l State year and type of currency l Software used

Criteria (continued) RESULTS RESULTS: l Sensitivity analysis conducted l Graphical presentation of C/E results l Any secondary analyses DISCUSSION DISCUSSION: l Limitations of the study l Policy implications l Intervention implications

Decision Balance

Economic Evaluations Across the Pyramid Note: Possible at each level Precision in cost estimation decreases as move down the pyramid