Economics Concepts Overview

Transcription

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2 Economics Concepts Overview Kevin Frick, PhD Johns Hopkins University

3 Course Overview Section A

4 Course Objectives To pick up and read any cost-effectiveness paper that is not a strictly methodological study To critically interpret the relative quality of studies in the literature To indicate where new research fits into the larger literature and what additional studies would be necessary in order to use to make a difference in policy 4

5 How We Will Achieve the Objectives These objectives can be achieved even with no economics background We will need to... Provide the economics background Discuss recommendations on doing economic analyses Discuss the process of performing economic analyses And read through and discuss examples in the literature 5

6 Limitations of the Objectives At the end of this course... Students should be in a position to discuss and contribute to a new economic analysis, but you will want to consult with a cost-effectiveness specialist before trying to do your own study Generally, one wouldn t expect to lead a study in an area after taking a single two-credit course 6

7 Course Outline Overview of economic concepts Recommendations for doing a standardized costeffectiveness analysis Decision rules Quality adjusted life years Continued 7

8 Course Outline One-year cost calculations Multiple-year cost calculations Putting it all together with examples and discussion 8

9 Economic Evaluations Done by the Instructor Surgery for dysfunctional uterine bleeding Acupuncture for osteoarthritis of the knee Temporomandibular joint disorder treatment Screening for visual acuity problems in nursing homes Screening for glaucoma Screening for amblyopia or pediatric eye conditions Continued 9

10 Economic Evaluations Done by the Instructor Treatment of trachoma in developing countries Community-based programs to avoid very low birth weight births, to encourage breastfeeding of longer duration, and to encourage older adults to volunteer 10

11 What Economics Does and Doesn t Provide Section B

12 Theoretical Underpinnings Basic Microeconomics Individuals value of time Employers value of time Tradeoffs individuals are willing to make Continued 12

13 Theoretical Underpinnings Guidelines Come from Various Sources Social welfare Justice Sometimes convention Sometimes pragmatism 13

14 What Economics Does Provide? Paradigm Explicit method of calculating costs and value of benefits of different health related research, policy, or provision alternatives Explicit method of comparing the calculations in the previous step 14

15 What Economics Doesn t Provide? Means of determining in all cases whether or not the new alternatives are preferred to the older alternatives Indication of what should or should not be valued and what things should be valued more than others Answers for resource allocation process without political and other considerations 15

16 Externalities Costs borne directly by employers, coworkers, other family members, and others in society More Broadly... An intervention can affect the environment, the criminal justice system, the education system, etc. Continued 16

17 Externalities Count what happens to everyone and not just intended recipient of a program Their existence provides a fundamental economic reason for government intervention 17

18 Examples of Externalities Smoking Loud music Public transit Pfisteria Litter Infectious disease exposure 18

19 Five Steps in a Larger Policy Setting Identify problem Brainstorm potential solutions Predict outcomes Value outcomes Choose policy Economics has particular value for steps four and five 19

20 Cost-Effectiveness and PH Research Framework Effectiveness Study Design Epidemiology Modeling Uncertainty Statistical Analysis Valuation Theory Personal and Societal Instruments Validity and Reliability Problem and Potential Solution Identification Cost Theory Empirical Primary Data Secondary Data Time Discounting Inflation Technological Change ICER Theory Sensitivity Analyses Inference Decision Making Political Context 20

21 Types of Economic Evaluation Cost of illness Cost minimization Cost-effectiveness Cost-utility Cost-benefit 21

22 Cost of Illness Medical care for prevention Medical care for treatment Social services for rehabilitation Continued 22

23 Cost of Illness Productivity loss Prevention Treatment During rehabilitation From decreased workplace productivity as a result of the disease and death 23

24 Examples of Cost of Illness What does cancer cost the United States? What does heart disease cost the United States? What does blindness cost the world? Continued 24

25 Examples of Cost of Illness Just because something has the highest cost of illness does not imply that it necessarily should have the most resources directed toward research or cure Depends on how much it will cost to do something about it 25

26 Cost Minimization Known and fixed objective At least two ways of achieving the objective Calculate the cost of the different methods of achieving the objective Determine which alternative costs the least 26

27 Cost Minimization Example Goal of eliminating incident cases of polio Is it achievable? If so, should we continue mass vaccinations or use targeted vaccination policies? Continued 27

28 Cost Minimization Example These studies are difficult because they don t focus on partial outcomes Need a high degree of certainty that outcome can be obtained or else these studies are not particularly helpful 28

29 Cost-Effectiveness Compare costs of at least two alternatives Compare effects of at least two alternatives Generally best if there is a single primary effect Compare difference in costs with difference in effects Continued 29

30 Cost-Effectiveness Outcomes can remain as clinical or even intermediate outcomes Example dollars per case of blindness averted or dollars per migraine avoided 30

31 Suitability of Cost-Effectiveness Studies There is a single outcome associated with a condition There is not enough information to assign a value to the outcome Difficulty of asking nursing home residents about the quality of their own lives 31

32 Cost-Utility Cost-effectiveness with a twist Outcome is quality adjusted life year Quality adjusted life year combines morbidity and mortality 32

33 Suitability of Cost-Utility Studies There are morbidity and mortality effects There are multiple types of morbidity effects Health related quality of life is the primary outcome of interest in the first place 33

34 Cost-Benefit Value everything in terms of dollars Not just costs avoided Subtract costs from dollar value of benefits to obtain a measure of net benefit Unique ability to determine whether or not a program is better than existing alternatives Continued 34

35 Cost-Benefit Value everything in terms of dollars Not just costs avoided Subtract costs from dollar value of benefits to obtain a measure of net benefit Unique ability to determine whether or not a program is better than existing alternatives 35

36 Supply and Demand Section C

37 Consumers Maximize utility Subject to a budget constraint Continued 37

38 Consumers In general, make tradeoffs between different goods and as one gets more of something each additional unit is worth less First Orioles game attended brings more enjoyment than 10th Obtain each good until the incremental/ marginal expense is just equal to the value an individual gets from the good/service 38

39 Consumers and Health Health has both aspects of a consumption good and an investment good Consumption Individuals enjoy having good health Investment Individuals in better health are better able to learn, work, increase skills, etc. Continued 39

40 Consumers and Health Policy makers need to decide what to research, what treatments to make available, and how much to spend on health care 40

41 Willingness-to-Pay Basics Willingnessto-Pay (Value) Note the decreasing willingness-to-pay with greater consumption of annual preventive visits 41

42 Where Does the Data Come From? Willingness-to-Pay Data Comes From... Observation of market behavior Time spent Money spent Combined value of two types of resources Dollar value of time related to (potential) compensation (wage, after tax and plus benefits) Continued 42

43 Where Does the Data Come From? Willingness-to-Pay Data Comes From... Contingent market valuation questionnaires Ask individuals what they are willing to pay 43

44 Examples of Using Market Behaviors Trichiasis surgery in the Gambia Monetary price paid for transportation Time cost Trichiasis surgery in Vietnam and Nepal Time for cancer screenings in Australia Generally WTP is assumed to be greater than the cost of illness 44

45 Examples Using Questionnaires Willingness to pay for second treatment with Zithromax for trachoma in Tanzania Willingness to pay for trichiasis surgery in Tanzania Willingness to pay to decrease the waiting time for cataract surgery Willingness to pay for more specific glaucoma screening test 45

46 Willingnessto-Pay (Value) Willingness-to-Pay and Demand Curves (Approximation) Price Annual Preventive Visits 46

47 Moving from Individual to Market Add up willingness-to-pay horizontally Answer the question how many people will be willing to pay a certain price? Adding up to a population level helps to answer the following question: How much more value will a population of individuals assign to the goods in question than the price that is paid by all consumers for all purchased? 47

48 Producers Assumed to maximize profits Produce at a point at which the cost of the next unit produced will be at least as large as the cost of the last unit produced Health policy does not always consider the fact that changes in policy will affect both consumers and producers 48

49 Societal Supply and Demand Price S D Quantity 49

50 Perspectives Whose costs and whose benefits matter Societal Government Patient Insurer 50

51 Marginal and Incremental Marginal Increase the size of a program but do not change the program itself Measure costs and effects Incremental Difference in costs and effects among two programs Key is the comparison of multiple programs 51

52 CEA in Policy Making CEA provides useful information but does not provide all the information that is needed Broad tradeoffs Does not capture some elements of fairness, justice, and feasibility Each decision maker can formulate his or her own decisions based on his or her own values 52

53 Why Has CEA Not Been Used? Lack of standardization Perception of being driven by assumptions Lack of centralized decision making Some decisions in the U.S. made at least citing evidence Is information presented in useful way? Should we focus on policy or individual patient? 53