Knowing what you get for what you pay

An introduction to cost effectiveness

FETP India

Objective this lecture

Understand how cost effectiveness studies are conducted

Key areas

• Types of analysis• Conducting a cost effectiveness analysis • Generalized cost effectiveness

Cost benefit analysis

• Concept Use of dollars as the common metric No use of health outcome Results expressed in benefit-cost ratio

• Advantages Allows comparisons with non health programmes Useful when intervention generates non health

outcomes

• Disadvantages Controversial Assigns a value to human life

ImpactOutcome

EfficiencyProgress

Effectiveness

Relevance

Adequacy

Public health managerial processes

Planning

Programming

Implementation

Programmedresources-----------

Allocatedresources

Inputs

Norms andprocedures

----------Applications of norms / procedures

Process

Agreed objectives /

targets-----------------

Achievedobjectives /

targets

Output

Efficiency and effectiveness

• Efficiency Relationship between the output obtained

and the efforts (input) invested

• Effectiveness Degree of attainment of pre-determined

objectives of a programme (e.g., in terms of reducing death / disability)

Definition of cost effectiveness analysis

• Method used to evaluate public health interventions in terms of cost per health outcome

• No attempt made to assign a monetary value to disease averted

• Outcome used: Cases Deaths Years of life DALYs

Cost effectiveness analysis: Relevance

• Estimates cost per health outcome• Provide additional information to

decision makers• Is not the only criteria to take into

account to make decisions

Effectiveness

• Obtain documented data on effectiveness

• Measure effectiveness precisely Meta analysis Confidence intervals

• Document assumptions The cheapest way to go to the moon is to jump.

However, we don’t do it because it does not work

Cost utility analysis

• Subset of cost effectiveness analysis• Take YLLs or DALYs as outcome

Discounting

• Reflect time preference• Applies to costs• Applies to effects• Subject to discussion

Conducting a cost effectiveness study

1. Frame the problem2. Identify interventions3. Define outcome measures4. Estimate net costs5. Estimate effects6. Compile costs and effects 7. Perform sensitivity analysis

1. Frame the problem

• Write study question• Define economic perspective

Ministry of health Health system Societal

• Chose time frame for intervention Absorb start up costs

• Chose analytic horizon for consequences

2. Identify interventions

• Take the baseline “Do nothing” scenario

• Define potential interventions Describe components Relate to measurable effectiveness

3. Define outcome measures

• Intermediate outcomes Cases identified, treated

• Final outcomes Cases prevented Life saved YLLs DALYs

Cost utility

4. Estimate costs

• Cost of the intervention• ? Cost of the disease averted

Medical costs Non medical costs

• ? Productivity losses

Net costs = Cost intervention - Cost disease averted

5. Estimate effects

• Burden of disease Incidence of disease Incidence of complications (natural history) Utility calculations

• Effectiveness of intervention Documented effectiveness estimates Compliance Coverage

6. Compile costs and effects

• Calculation of cost effectiveness ratio Average Incremental

• Can address various options Coverage Discounting

7. Perform sensitivity analysis

• Parameters to examine Costs

• ps and qs

Discounting Effectiveness Burden of disease

• Combinations • Advanced analysis

Key elements of the report of a cost effectiveness study

• Study perspective, time frame and horizon• Study question• Assumptions• Description of interventions• Identification of relevant costs• Cost effectiveness ratios• Sensitivity analysis• Discussion

Cost effective and cost saving

• Some interventions have negative net costs

• Cost saving interventions are: Uncommon Subject to distributional effects

• Cost effective does not mean cost saving

• Human life is not “cost effective” Investment is needed to sustain it

Cost effectiveness criteria

• Not cost effective Cost per DALY above 3 GDP / capita

• Cost effective Cost per DALY under 3 GDP / capita

• Highly cost effective Cost per DALY under 1 GDP / capita

WHO commission on macroeconomics and health

Cost effectiveness versus burden of disease

• Cost effective intervention can prevent only a small burden of disease

• Some large sources of burden of disease may be preventable through non cost effective interventions

Cost effectiveness of various health interventions

Limitations of traditional cost-effectiveness studies

• Different horizons • Different types of costs included• Different costing methods• Different discounting rates• Different outcome measures• Incremental approach

Existing interventions not reconsidered

• One dimension• May not address variations by regions• Conflicts of interests

The WHO CHOICE project: Generalized cost-effectiveness

• Identical horizons • Standardized approach to including costs• Unique costing methods• Standardized discounting policy• DALY as outcome measures• Null case base

Existing interventions reconsidered

• Multiple dimension• Region specific• Science dissociated from advocacy

Generalized cost effectiveness: Challenges

• Recent concept• Difficulties in adapting theoretical

concepts• Resource intensive• Single study team (at the moment)

Generalized cost effectiveness: Example of results for the SEAR D

regionIntervention Intervention costs DALY averted Average CE

ratio

Disinfection at point of use with education 523,019,455 3,248,440 161

Halving the population without improvedwater supply

585,826,305 951,318 616

Halving the population without improvedwater supply and sanitation

5,907,522,335 4,908,162 1,204

Improved water supply and sanitation (98%) 11,578,743,777 9,627,739 1,203

Improved water supply and sanitation withdisinfection (98%)

14,184,319,328 25,443,560 557

Piped water supply and sewage withtreatment (98%)

39,689,844,066 38,442,566 1,032

Other criteria to chose an intervention

• Feasibility• Ethics• Equity• Sustainability• Acceptability

Take home messages

• Chose cost effectiveness analysis • Frame the question right• Follow up progress on the generalized

cost effectiveness concept