1. Health Economic Course Series
PRIORITY SETTING

2. Economics = study of unlimited needs combined with limited resources
Government intervention required where market fails
Given limited resources and unlimited needs, how does government prioritize its interventions?

3. Mechanism to decide on Best Use of Resources
Free Markets = price mechanism
Cooperative/community schemes = bottom up
Centralized rational planning (e.g. communist/socialist countries) = top down
Non of these is perfect
Equity?
Efficiency?
Combinations
Importance of clear criteria

4. Historical Allocation
Most widely used method
= “give the same last year”
If needed adapted to budget changes, inflation etc
This avoids difficult choices,
BUT
-what if needs change (e.g. epidemic)?
-what if technology changes (e.g. cheaper provision)?
-what if costs change (e.g. economies of scale)?

5. Criteria for Resource Allocation
Technical Efficacy of intervention – researchers
Operational Effectiveness of interventions – doctors
Political desirability – politicians
Feasibility – planners
Fit within development agenda – donors
Preferences – consumers
Equity – all
Burden of disease – epidemiologist
Costs of interventions - economists

6. Priority setting framework WDR 93

7. Which interventions save most lives?
Burden of disease (BoD)
= Total quantity of life years lost due to mortality and morbidity, adjusted for the decreased quality of life experienced due to illness.
Measured in: Disability Adjusted Life Year (DALY)
= quantitative indicator of burden of disease that reflects the total amount of healthy life that would be lost, from premature mortality or from some degree of disability during a period of time, due to disease.

8. DALYs due to living with disability

9. DALYs due to early death (Black area measures DALYs; Black+White is a standard life)

10. DALYs due to disability and premature death combined

11. Choices behind DALYs
Choice of standard life expectancy for men and women
Severity weight for disabilities:
1 is severely disabled or death, 0 is healthy
Weight for age which disease occurs:
Children and old < adults
Time preference:
Long term effects “discounted”,
i.e. future is valued less

12. Disability weights Severity weights Indicator conditions 1 .00 - .02
Vitiligo on face, wt for age>2 sds below normal 2
Watery diarrhoea, severe sore throat, anaemia 3
Radius fracture in cast, infertility, rheumatoid arth, angina 4
Below knee amputation, deafness 5
Rectovaginal fistula, mild mental retardation, Downs’ syndrome 6
Unipolar major depression, blindness, paraplegia 7
Active psychosis, dementia, severe migraine, quadriplegia

13. Example of DALY calculation
Girl, 5 years old, treated successfully for deafness, who lives until she is 82,5
Life
82,5 – 5 = 77,5
Disabled life
Deafness = 30% disability
1 year of life = (1-30%) = 0,7 year
DALY if deaf
77,5 x 0,7 = 54 year
DALY lost due to deafness or DALY gained due to treatment
77,5 – (77,5 x 0,7) = 0,3 x 77,5
=77,5 – 54 = 23,5

14. Priority setting framework WDR 93

15. Different types of economics evaluation
1. Cost effectiveness
Used to compare interventions on the basis of a specific health outcome (e.g. DALY saved)
2. Cost utility
Used to compare interventions on the basis of a utility-weighted health outcome (e.g. QALY saved)
3. Cost benefit
Used to compare interventions on the basis of a monetary value of the health outcome (e.g. $ cost -- $ benefits)

16. Cost effectiveness of interventions
Cost-effectiveness ratio =
Cost of intervention
DALYs gained
Costs:
= Direct service costs (fixed and variable) that could be attributed to particular interventions.
Excluded: indirect and private costs (government perspective), intangible costs (pain & suffering)

17. Cost-effectiveness of interventions
Relative concept:
More/less cost-effective interventions
Overall budget
Measurement of costs limited
Measurement of effectiveness limited
Other criteria to prioritize

18. Priority setting framework WDR 93

19. Priority Setting Priority interventions are those that:
Address conditions that are a high burden of disease (high DALY loss)
Can be delivered with low cost per DALY gained (cost effective)
“League tables” of interventions:
Low to high cost effectiveness ratio ($/DALY gained)
More or less cost effective

20. Yearly infection averted
Example: HIV/AIDS
Intervention
Yearly costs
Yearly infection averted
Average CE ratio
Yearly DALYs averted
$ millions
Millions
$/infection averted
millions
$/DALY averted
Mass media 16
0,27 58
4,5 3
Peer education sex workers 70
1,04 68
14,3 4
Peer education and STI treatment sex workers 74
1,26 59
20,2
School based education 77
0,01
6704
0,2
376
VCT
406
0,31
1315 5 82
PMTCT
151
0,19
847
4,7 34
ART
First line
1507
0,04
34825
2,5
569
First and second line
6945
185396
3,5
1977

21. EDR 1993 Package of priority interventions
Public Health
Immunization
School-base health services
IEC on nutrition and FP
Reduction tobacco and alcohol
Improvements of household environment
AIDS prevention
Clinical Services
Maternal health
Family planning TB
STDs
Child and infant health
$12 per capita

22. Macroeconomics and Health
2001
Essential health services package, scaled up to reach 80-90% of the population by 2015.
= $14 per capita for the least developed countries.
Revision:
New interventions added (ART)
New evidence on effectiveness
Updated BoD since 1993
Country-specific costs
Costs of scaling-up included