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

Adequacy

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

Process

Output

Norms and
procedures

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

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

Progress
Efficiency

Outcome

Impact

Effectiveness

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

Chose time frame for intervention

Ministry of health
Health system
Societal
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

Effectiveness of intervention

Documented effectiveness estimates

Compliance
Coverage

6. Compile costs and effects

Calculation of cost effectiveness ratio

Average
Incremental

Can address various options

Coverage
Discounting

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 costs

DALY averted

Average CE
ratio

Disinfection at point of use with education

523,019,455

3,248,440

161

Halving the population without improved

water supply

585,826,305

951,318

616

Halving the population without improved

water supply and sanitation

5,907,522,335

4,908,162

1,204

Improved water supply and sanitation (98%)

11,578,743,777

9,627,739

1,203

Improved water supply and sanitation with

disinfection (98%)

14,184,319,328

25,443,560

557

Piped water supply and sewage with

treatment (98%)

39,689,844,066

38,442,566

1,032

Intervention

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