Economic evaluation of health programmes Department of Epidemiology, Biostatistics and Occupational Health Class no. 1: Introduction Sept 3, 2008

Plan of class  Introductions  Course outline  Why economic evaluation? Some examples.  General types of economic evaluation  Perspective of an economic analysis  Economic evaluation as a craft rather than an exact science

Course web page courses/EPIB591/

Why economic evaluation in health? …while people have almost limitless health care needs Available resources are finite…

The notion of opportunity cost A resource used up to accomplish one purpose is no longer available for other purposes The opportunity cost of a resource is its value in its next best use

Some recent examples Economic evaluation of posaconazole versus standard azole prophylaxis in high risk neutropenic patients in the Netherlands. (Eur J Haematology Aug 08) Economic evaluation of varicella vaccination in Italian children and adolescents according to different intervention strategies: The burden of uncomplicated hospitalised cases. (Vaccine Aug 08) Cost effectiveness of chest pain unit care in the NHS. (BMC Health Services Research Aug 08). Economic Evaluation of Influenza Pandemic Mitigation Strategies in the United States Using a Stochastic Microsimulation Transmission Model. (Value in Health, July 08).

Main types of economic evaluation  Cost-benefit analysis  Cost-effectiveness analysis  Cost-utility analysis

Cost-benefit analysis Costs Benefits Benefits – Costs > 0 Desirable intervention

Cost-effectiveness analysis Overall cost of new intervention (e.g., SE) Outcome of new intervention Overall cost of alternative intervention (e.g., Sheltered workshop) -= Difference in cost Outcome of alternative intervention - = Difference in outcome Difference in cost Difference in outcome = Incremental cost per incremental unit of outcome (e.g., $/additional day of work)

Possible outcomes of incremental cost- effectiveness ratio (ICER) calculation ICER tells us cost of one more day of work with SE Choose alternative! Choose SE! ICER tells us cost of one more day of work with alternative SE more effective SE less effective SE more costly SE less costly

Cost-utility analysis  Measure effectiveness using a measure of utility to people affected by the intervention  Most common measure of utility is Quality- Adjusted Life Year

But… which costs do we measure? The importance of point of view

Government-borne health and social care expenditures Other government-borne personal services (e.g., prisons) Personal H & SC expenditures & time Tax revenues Personal income/wages Government-borne disability benefit payments Private disability payments H & SC expenditures covered by private insurance Types of resources expended or gained, by source

Government-borne health and social care expenditures Other government-borne personal services (e.g., prisons) Personal H & SC expenditures & time Tax revenues Personal income/wages Government-borne disability benefit payments Private disability payments H & SC expenditures covered by private insurance Department of Health perspective

Government-borne health and social care expenditures Other government-borne personal services (e.g., prisons) Personal H & SC expenditures & time Tax revenues Personal income/wages Government-borne disability benefit payments Private disability payments H & SC expenditures covered by private insurance Government perspective

Government-borne health and social care expenditures Other government-borne personal services (e.g., prisons) Personal H & SC expenditures & time Tax revenues Personal income/wages Government-borne disability benefit payments Private disability payments H & SC expenditures covered by private insurance Societal perspective Transfer payments – no resources added or lost beyond administrative expenses

Exercise  What costs would you include in an evaluation of a home care stroke rehab program, compared to usual care, which involves longer hospital stays? Detail by perspective: patient; hospital; health care system; society.

Economic evaluation: a craft rather than an exact science  Conceptual controversies, e.g.:  Valuing caregiver time  Valuing productivity losses  Choice of discount rate  Many decisions when conducting an evaluation, e.g.:  Choice of overall method  Degree of precision in what and how to measure both costs and benefits