Cost-Effectiveness of health programs April 10, 2000

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Cost-Effectiveness of health programsApril 10,
2000
Presented by   Donald S. Shepard, Ph.D. Schneider
Institute for Health Policy Heller School, Room
122A, Mail Stop 035 Brandeis University Waltham,
MA 02454-9110 Tel [phone] Fax
781-736-3965
Web http//ihp.brandeis.edu/shepard E-mail
Shepard_at_Brandeis.edu   Brandeis University April
10, 2000
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Practical information

• Teaching assistant
• RConst9536_at_aol.com
• Administrative assistant
• Linda Purrini, Next to library in Heller
• 781-736-3930
• Purrini_at_Brandeis.edu
• Cost of packet 3.63

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Key book

• Gold, Marthe R. et al. Chapter 6 Estimating
  Cost in Cost-Effectiveness Analysis,
  Cost-Effectiveness in Health and Medicine.
  Oxford University Press, New York, 1996,
  pp.176-209.
• (Reports the findings of the 1993 U.S. Panel on
  Cost-Effectiveness Analysis.)

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Cost minimization

1. Ancestor of cost-effectiveness
2. Goal find the least expensive approach to
   generating the same output.
3. Illustrated by the refrigerator costing exercise,
   in which you attempt to minimize the cost of
   keeping vaccines refrigerated.

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Measuring effectiveness

• Two fundamental policy issues in debating policy
• Prediction what will happen
• Valuation an appropriate measure of output
• Zeckhauser and Shepard (1976) article discusses
  these issues.

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Von Neumann Morgenstern Utility 1

• Suppose we have a good outcome which has a
  utility of 1 (e.g. living year in perfect health)
• Bad outcome has a utility of 0 (e.g. dying at the
  start of the year)
• Intermediate outcome (I) has utility of x (e.g.
  living with a health limitation), x u(I)

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Von Neumann Morgenstern Utility 2

• Suppose I is indifferent between probability p of
  good outcome, and 1-p of bad outcome
• The utility is von Neumann-Morgernstern if x
  equals p.

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Assessing utilities

• Two possible ways of assessing utility
• Probability approach breakeven probability
• Time tradeoff - breakeven time

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Time tradeoff

• Time tradeoff - find the breakeven time
• Suppose we were to live 10 years with an impaired
  state, I
• Instead, we could live Y years with perfect
  health.
• Suppose the the value y would make us just
  indifferent.
• Then the utility of I is y / 10.
• E.g., if y is 7, then the utility is 7/10 0.70.