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Economic evaluation of health programmes

Economic evaluation of health programmes. Department of Epidemiology, Biostatistics and Occupational Health Class no. 12: Cost-benefit analysis – Part 1 Oct 15, 2008. Plan of class. Review assignment no 2 Discuss start time of 3 future classes Discuss what we might do with 2 extra classes

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Economic evaluation of health programmes

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  1. Economic evaluation of health programmes Department of Epidemiology, Biostatistics and Occupational Health Class no. 12: Cost-benefit analysis – Part 1 Oct 15, 2008

  2. Plan of class • Review assignment no 2 • Discuss start time of 3 future classes • Discuss what we might do with 2 extra classes • CBA vs CEA/CUA • Methods for valuing benefits in CBA – old and new (1)

  3. CUA/CEA vs CBA • CUA/CEA seek to assess $ per unit benefit, e.g., $/QALY • CBA seeks to determine in the absolute whether a program is worthwhile: not just measuring costs, need to value benefits in monetary terms • Ex: Systematic detection of high blood pressure in CUA vs CBA – what are program benefits?

  4. Net social benefit • See Box 7.1 Does this program have a positive net benefit if r=5%?

  5. Types of efficiency vs types of economic evaluation • CUA/CEA: more focused on production efficiency – how do we achieve given outcomes with fewer resources? • CBA: can also address questions of allocative efficiency – which outcomes should we pursue? • Example: Education vs CO2 reductions vs reducing wait times for cataract surgery

  6. The concept of market • A market for a good exists if sellers are willing to exchange it for other goods (or, usually, money) with others who are willing to give up enough of those other goods for an exchange to take place

  7. Positive externality • The beekeeper and the cherry grower

  8. Negative externality But:

  9. CBA and externalities • CUA/CEA: consider health consequences for individuals directly affected by programme • CBA: can consider overall consequences for society including externalities (but in practice questions may not ask for all this information) • Ex: Early intervention service for psychosis – impacts on families

  10. Pareto-optimality; Kaldor-Hicks • Pareto-optimality: No trade can be made such that someone is better off and no-one is worse off • One person owning everything can be Pareto-optimal! • Kaldor-Hicks: If winners gain enough that they could compensate losers if they wanted to, welfare has been increased.

  11. Early method for evaluating benefits: Human capital • All or part of benefit of programme measured in terms of economic productivity • Discredited because from a welfare economics point of view, this is too narrow a question. Winners might value the health benefit much more than its productivity gain. • Ex: cosmetic surgery.

  12. Method no. 2: Revealed preference • Value of a life implied in: • Wage differentials for riskier jobs • Price increment for safety features

  13. Modern: Contingent valuation • Contingency of a market for a health program existing. • How much is it valued – how much are people prepared to pay for it?

  14. Willingness to pay for what? • Degrees of uncertainty in what one pays for: • Certain need, certain health outcome • Certain need, uncertain health outcome • Uncertain need/future use,uncertain outcome • Global WTP: • Question encompasses future health cost savings • Question encompasses production gains and income effects

  15. Exercise • Design corresponding WTP questions with regards to a program providing expensive chemotherapy drug

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