Intrinsic vs instrumental value of health gains

Transcription

1 Teaching programmes: Main text: Master of Public Health, University of Tromsø, Norway HEL-3007 Health Economics and Policy Master of Public Health, Monash University, Australia ECC-5979 Health Economics Master of Health Administration, Monash University ECC-5970 Introduction to Health Economics Olsen JA (2009): Principles in Health Economics and Policy, Oxford University Press, Oxford Lecture 13: Measuring outcomes in money terms: Production gains (PG) Willingness to pay (WTP) Jan Abel Olsen University of Tromsø, Norway Intrinsic vs instrumental value of health gains Intrinsic value Physical health Mental health Instrumental value Social functioning Workforce participation and income 1

2 Valuing what? Patient reported outcome measures (PROMs) Quality adjusted life years (QALYs) Patient reported experience measures (PREMs) satisfaction with service provision per se (e.g. caring, information, amenities) Improved well-being beyond QALYs Consumption/production gains Valuing what in Grossman terms [Grossman M (1972) On the concept of health capital and the demand for health, JPE] Health care has instrumental utility only: U = u[c, H (HC)], i.e. no process utility Consumption benefits from improved health U(H): ΔH ΔU Investment benefits from improved health U[C(H)], i.e. utility from the increased consumption due to higher income, I, due to return-to-work: ΔH ΔI ΔC ΔU 2

3 Return to work: what are the indirect benefits? Production gains? Increased private income/consumption? Increased tax-revenues? Sickness benefit savings? Real economic impacts vs transfer payments: The total consequences are PG only! Employee Employer Government Production gains + PG Income and taxes +I - T - I + T Sickness benefits - SB + SB 3

4 Real economic impacts vs transfer payments: The total consequences are PG only, which is distributed across the 3 parts as follows: Employee Employer Government Production gains + PG Income and taxes +I - T - I + T Sickness benefits - SB + SB Net effects Increased own consumption Private gains Increased profit Increased public purse Collective gains Positive vs normative issues How do we measure production gains? To which extent should such gains be accounted for in an economic evaluation? Society may disregard some gains, because of their unacceptable distributional consequences the economic impact on the rest of society represents the basis for judging which gains society might find ethically acceptable to include (Weinstein et al 1997) 4

5 Only the impact on the rest of society Potentially relevant Production Gains Net contributor (return to work) Net recipient (remain out of work) Life saving Health state improvement T Taxes T + SB Tax + avoided sickness benefit - C Own consumption = pension 0 Olsen JA, Richardson J (1999) Production gains from health care: What should be included in costeffectiveness analyses? Social Science and Medicine; 49: Conclusions on PG Conceptual confusion in the health economics literature on the terms indirect costs and indirect benefits The real economic effects ( indirect benefits ) are the production gains (PG) only, not the transfer payments How much of PG should be accounted for in an economic evaluation? All of it? Only tax-contributions to society? Only the part of the tax-contribution that go to finance increased health care? Only if the increased health care finance outweigh the costs of treatment ( pay their way in terms of health care)? Value judgments because of the distributional consequences 5

6 Contingent valuation = WTP & WTA In the absence of markets Construct hypothetical markets in surveys: How much are people valuing goods that are not available in real markets? Describe a hypothetical good What is the maximum you would be willing to pay (WTP)? Valuation of a real good that people already possess What is the minimum compensation you would be willing to accept (WTA) for you to give it away? Theoretical foundation of WTP Neo-classical welfare economics: Consumers are the best judges of their own welfare A good has value to a consumer only to the extent that she is prepared to sacrifice something in order to obtain it The more she is willing to sacrifice of own income, the higher is the good being valued 6

7 Illustrating WTP I I 0 WTP X1 max WTP for X WTP 1 = I 0 - I 1 X2 b I 1 max WTP for X 2 = I 0 - I 2 c I 2 a X 1 X 2 X Theory vs practice Theoretical arguments in favour of WTP 1) WTP can include all attributes that people value, i.e. a method which completely respect people s preferences 2) WTP can compare these benefit valuations with costs, so that only programmes with positive net benefits are implemented Empirical evidence against WTP WTP is sensitive to theoretically irrelevant factors, and insensitive to theoretically relevant factors 7

8 What is theoretically (ir)relevant? Relevant Size-of-the-good : More health gains is always better! Irrelevant Framing effects Question format Ordering Starting point, or any numerical anchor! All sorts of design subtleties Behavioural economics experimental economics Any number can be an anchor for WTP Unrelated numbers an experiment: Write down the last 2 digits [##] in your social security number Would you have been willing to pay ## for good X? Yes / No What is your max WTP for good X? WTP depends on your social security number 8

9 Size-of-the-good in practice Testing p in Portugal, and N in Norway: p = risk reduction for heart attack N = number of people treated in 3 different programmes Split samples: p 10% 20% 40% risk reduction N heart patients (bypass operations) cancer patients (radio therapy) lives saved from rescue Size-of-the-good results Split-sample comparisons Increased outcome Change in Mean WTP Norway: hearts 100 % 18 % cancer 100 % 19 % ambulance 50 % - 11 % Portugal: heart risks 100 % - 19 % heart risks 100 % 7 % heart risks 400 % - 13 % Olsen JA, Donaldson C, Pereira J (2004) The insensitivity of willingness-to-pay to the size of the good: new evidence for health care, Journal of Economic Psychology 25:

10 Why so insensitive? Economics: Income effect? but WTP is 0.1% of income Strong diminishing marginal utility of the goods? but implies people don t care about health outcomes Psychology: Limited cognitive capacity Selective focus on particular attributes (other than outcomes?) respondents employ heuristics (cognitive shortcuts) Predetermined good will account Charitable giving purchase of moral satisfaction Satiated to answering Protest to the WTP-experiment WTP to quit Olsen JA, Røgeberg OJ, Stavem K: What Explains Willingness to Pay for Smoking-Cessation Treatments - Addiction Level, Quit-Rate Effectiveness or the Opening Bid? Applied Health Economics & Health Policy,

11 What explain WTP for smoking cessation medication? Imagine the existence of a smoking cessation drug that would make 3 [9] smokers out of 10 who tried it quit smoking. Do you think that smokers or the government should pay for such a product? 1) smokers 2) the government 3) cost-sharing; smokers + the government. If answering 2) or 3): Would you be willing to pay NOK 200 [600, 1500] in extra taxation per year in order to finance the government s increased expenditures? Yes/No. What is the maximum amount you would be willing to pay in extra taxation per year for this purpose? WTP depends on the opening bid, not the effectiveness! Opening bid Effectiveness out of 10 Mean WTP Median WTP N % zero WTP Total Total Total Total Total ANOVA test of group linearity across bids, F = , p<

12 What explain smokers WTP for quitting? Imagine that a new and safe treatment would cease your desires to smoke, and that smoking would make you feel as it did when you had your first cigarette. Would you be willing to pay NOK 1000 [5 000, ] for such a treatment? Yes/No. What is the maximum amount you would be willing to pay for this treatment? WTP depends on the opening bid Opening bid Mean Median N % zero WTP Total ANOVA test of group linearity, F = , p <

13 Conclusions on the WTP-methodology In theory, WTP - represents a comprehensive measure of benefit, and - enables comparisons of benefits with costs In practice, WTP is: - insensitive to theoretically relevant factors: the size of the good doesn t matter - sensitive to theoretically irrelevant factors: respondents are easily manipulated by the chosen framing of the question Normative aspects on the use of WTP in health The consumer vs the citizen WTP reflect the hypothetical consumer Contributions to a public health service reflect Selfish insurance motive Altruistic cross-subsidisation Inequitable: WTP depends on ATP (ability to pay) The higher your income, the higher your WTP Health services for rich people are more valued 13