Cost-Effectiveness Problem

1
Cost-Effectiveness Problem

• You have a 1.5 billion budget to spend on any
  combination of these programs

2
Issue Limited Resources

• Assumption Theres not enough money to fund
  every effective treatment (screening program,
  etc.)
• Goal Get the most health for our money. How can
  we allocate our fixed budget to provide the most
  health care?

3
Answer Cost-Effectiveness

• Determine how much health per dollar each
  intervention provides - its cost-effectiveness
  and how many of these interventions are needed
• Fund interventions in decreasing order of
  cost-effectiveness until the budget is spent.

4
Cost-effectiveness

• Fund I,B,G,E,C,D, and H for 291
  patients15,374.8 HBUs (3.06 per 5031 people)

5
Effectiveness only

• Result Fund A-D and E for 1498
  patients13,994.2 HBUs (3.21 per 4338 people)

6
Perspective

• Patient perspective
• Cost to patient (may be 0 due to insurance)
• Health to patient
• Payers perspective
• Cost to payer (employer, HMO, insurance)
• Health to patient pool
• Social perspective
• Cost to society, including lost productivity
• Health to society

7
Measuring Costs

• Costs are usually measured in dollars, adjusted
  for inflation over time.
• Costs differ from charges, which include profits,
  market effects, etc.
• Costs should include future related medical costs
  and savings. Future costs are discounted

8
Future Costs

• Some argue that costs should include all future
  costs and savings (wages, etc.) If you do this
• Life-extending interventions become less
  cost-effective than life-enhancing interventions,
  because youre usually extending low-quality
  life.
• Life-saving interventions become less
  cost-effective in the elderly, who are net
  consumers, than in the young, who are net
  producers.

9
Benefit, Effectiveness, Utility

• Cost-benefit analysis Benefit in dollar
  units (e.g. willingness to pay for result)
• Cost-effectiveness analysis Benefit in health
  units (e.g. AIDS cases prevented, lives saved)
• Cost-utility analysis Benefit in utility
  (quality-of-life) units (e.g. QALYs)

10
Measuring Effectiveness

• The recommended measure for cost-effectiveness is
  the quality-adjusted life year, a common unit for
  comparison.
• QALYs ? (time in state utility of state)
• 1 year of life in perfect health is as good as 2
  years of life in 0.5 utility health.
• Under 50,000 or 100,000/QALY is widely regarded
  as cost-effective

11
Graphing the CE Ratio
12
CEA problem 2From Stinnett Paltiels CEA short
course
You must choose which of 5 mutually exclusive
programs to fund. You currently fund option A.
Considering your other decisions, youre willing
to spend up to an additional 200,000 per QALY.
13
Marginal CEA(aka Incremental CEA)

• What if we have to weigh programs against each
  other, or determine if a new treatment is better
  to give than the current standard?
• Marginal CEA focuses on how much more health
  could we get by spending an additional amount

14
CEA Problem 2
Step 1 Order the programs by cost. If some
option costs more and delivers less than another,
eliminate it from consideration.
15
CEA Problem 2
Step 2 Calculate a marginal CE ratio for each
program, relative to the one above it.
16
CEA Problem 2
Step 3 Eliminate any program that has a higher
marginal CE ratio than the program below it.
If youd spend 571k more to get 17.1 more QALYs,
instead spend 175k more to get 17.9.
17
CEA Problem 2
Step 4 Recalculate marginal CE ratios and choose
the program that has the largest marginal CE
ratio thats less than the threshold CE ratio
(200,000).
In this case, neither C nor E meets our
threshold. We should continue to fund A.
18
CEA GuidelinesThe Panel on Cost-Effectiveness in
Health and Medicine (1993)

• 1. Reference case analysis
• Societal perspective (resource allocation)
• Compare interventions with status quo
• Use QALYs based utilities on community
  preferences, not patient preferences
• Use direct and indirect costs, but need not
  include unrelated future health and non-health
  costs. Discount costs at 3.
• 2. Perform sensitivity analysis

19
Conclusions

• Cost-effectiveness analysis asks how to spend a
  fixed budget for the most health
• The cost-effectiveness of an intervention is
  usually reported as its cost-per-QALY ratio.
• Interventions with lower /QALY are more
  cost-effective and should be preferred to
  interventions with higher /QALY