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

Public health managerial processes

Planning

Relevance
Programming Implementation

Adequacy
Process
Norms and procedures

Inputs
Programmed resources ----------Allocated resources

Output
Agreed objectives / targets ----------------Achieved objectives / targets

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

Outcome

Impact

Effectiveness

Progress Efficiency

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 dont 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. 2. 3. 4. 5. 6. 7. Frame the problem Identify interventions Define outcome measures Estimate net costs Estimate effects Compile costs and effects 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 Documented effectiveness estimates Compliance Coverage

Effectiveness of intervention

6. Compile costs and effects

Calculation of cost effectiveness ratio
Average Incremental Coverage Discounting

Can address various options

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 region

Intervention Disinfection at point of use with education Halving the population without improved water supply Halving the population without improved water supply and sanitation Improved water supply and sanitation (98%) Improved water supply and sanitation with disinfection (98%) Piped water supply and sewage with treatment (98%) Intervention costs 523,019,455 585,826,305 5,907,522,335 11,578,743,777 14,184,319,328 39,689,844,066 DALY averted 3,248,440 951,318 4,908,162 9,627,739 25,443,560 38,442,566 Average CE ratio 161 616 1,204 1,203 557 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