CostEffectiveness

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Cost-Effectiveness Resource Allocation

• Wisconsin Public Health
• and Health Policy Institute
• May 26, 2005

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For consideration

• How should the health policy community balance
  competing priorities of
• Maximizing health
• Minimizing budget
• Should prevention be thought of differently from
  other types of health care?
• What is the role for the public in this
  discussion?

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Life Expectancy at Birth
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Infant Mortality Rates

• Infant Mortality Rates (per 1,000 Live Births)
• By OECD Country in 2000

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Percentage of GDP Spent on Health Care in 1990
and 2000
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Reasons for Changes in Medical Care
Spending 1987-2000. Thorpe, K et al, . Health
Affairs, 2004
Percent change in spending attributable to
Increase cost/ Rise in treated
Increased treated case prevalence
population
Disease and s (in billions)
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Cost-Effectiveness Analysis

• (aka..value for money)

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Costs
Costs include Care by health professionals Labs
and X-Rays Hospital/facility charges Medications O
ther expenses related to illness
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Effectiveness in Cost-Effectiveness Analysis

• An effective treatment or intervention does one
  or both of the following
• Increase how long people live
• Improve or maintain how well people feel

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Quality-adjusted life yearsA measure of
effectiveness

• (Life expectancy) (quality of life)QALYs

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Health-related Quality of Life
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0
Dead
Perfect health
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CalculationsQuality-Adjusted Life Years
If, HRQL 0.7 And, A treatment gives 10
extra years of life (_at_ 0.7 per year) Then.
People receiving the treatment gain Seven
Quality-Adjusted Life Years (7 QALYs)
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A QALY is a QALY is a QALY
People HRQL LE
QALYs Saves 100 x 0.8 x 50
4000 Lives Improves 10,000 x
0.1 x 4 4000 HRQL
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The cost-effectiveness of one thing compared to
another
Cost treatment A Cost treatment B
Effectiveness treatment A Effectiveness
treatment B COST per QALY
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For example
Cost Life Expectancy
HRQL QALYS Group A 80,000 2 Years X
.6 1.2   Group B 4,000
1 Year X .8
0.8   Cost-effectiveness 80,000 - 4,000
76,000 190,000/QALY 1.2 0.8
0.4
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Whats a Good Buy?
Expensive more than 100K/QALY Reasonable
50K/QALY Very Efficient less
than 25K/QALY
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Cost-Effectiveness AnalysisSome Questions..

• Should life-saving be placed on the same
  mathematical scale as quality improving?
• Is it appropriate to consider cost per QALY when
  diseases are immediately life-threatening?
• How would we justify discriminating against
  people who have diseases that are inefficient
  to treat?
• Should QALYs count the same regardless of whether
  they go to young or old?
• The not so sick, versus the very sick?
• When prevention is as cost-effective as cure,
  which gets priority?

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COST/QALY Selected Medicare Services
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For consideration

• Should prevention be thought of differently from
  other types of health care?

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Estimated costs of treating selected conditions.
Gold, et al, 2005 (unpublished)
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We are such stuff as dreams are made on, and our
little life is rounded with a sleep

• The Tempest
• Shakespeare, W. et al

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For consideration

• What is the role for the public in this
  discussion?

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Health, Defense and Education
of GDP
3.6