Economic Evaluation

in Health Care

Dr. S. Bhattacharya
Drummond et al.
 Objectives
To improve efficiency by converting inputs (money,
labour) into outputs (saving lives, health gain)

Setting priorities for resource allocation for

formulation of health care policy.
 Terms you should know know
• Allocative efficiency- It deals with the choice
of what health care to be provided for
maximizing benefits within the available
resources.

• Technical efficiency- it deals with the choice of

how to provide health care with minimum
input for a given output.
Evalution partial or complete?
Is there Are both costs and consequences of the alternatives examined?
compa
rison NO YES
of two Partial evaluation Partial evaluation
or
more NO Outputs Costs only Cost outcome description
alterna only
tives? Outcome Cost
descriptio description
n
Partial evaluation Full evaluation

YES Efficacy or Cost Cost effectiveness

effectiveness analysis analysis
evaluation Cost utility analysis
Cost benefit analysis
 Costs and benefits
• Direct cost- immediate  Direct benefit-
(staff time, immediate (change in
consumables) B.P. or Reduction in
• Indirect cost-work loss tumour size)
due to treatment  Indirect benefit-patients
• Intangible costs- pain, having more working
anxiety, quality hours
 Intangible benefit-
happiness, well being,
satisfaction (QALY)
 Evaluation

Resource Health care Health

consumed programme improvement
 Cost effectiveness analysis
• Here unit cost is compared with measurable
effect (qualitative).
• Here benefit is expressed in terms of results
achieved (live saved)
 Example
Programme Percapita Reduction in mortality
expendeture in Rs –IMR in %

Immunization 25 10

ORS 35 10

Nutrition supplement 65 10

Safe water and 145 10

sanitation
 Cost utility analysis
Concerned with technical efficiency+
allocative efficiency
Sophisticated form of CEA
Utility is the measure of the preference or
value that and individual or a society places
upon a particular health state.
0-1, death to perfect health.
Utility is measured by standard gamble
technique in HE.
 Quality-adjusted life-year (QALY)
• Generic measure of disease burden, including
both the quality and the quantity of life lived.
• It is used in assessing the value for money of
a medical intervention.
• One QALY equates to one year in perfect health.
• If an individual's health is below this maximum,
QALYs are accrued at a rate of less than 1 per
year.
• To be dead is associated with 0 QALYs,
• In some circumstances it is possible to accrue
negative QALYs to reflect health states deemed
'worse than dead'.
 How you will prooced?
• If one intervention is both cheaper and more
effective than its comparator?
• Unfortunately if a (common) particular
intervention is more effective but more costly
with its comparator-??
 ICER
• Incremental cost effectiveness ratio is calculated
by
= cost of A- cost of B/effectiveness of A-
effectiveness of B
 The difficulty is that there is no magic cut off
number that can say is cost effective.
 Decision makers ceiling ratio is important.
 NICE showed that interventions seemed to be
recommended for values at or below Rs. 30000
per QALY.
 Example
• Without intervention A have Life expectancy
of 3 with QALY value 0.45
• With intervention the pt A have LE of 8 yrs
with QALY value of 0.7
• With no t/t 1.35 QALY are produced against
5.6 QALY.
• Net gain 4.25 QALY.
 Cost benefit analysis
• Economic benefits of any programme are
compared with the total cost of that
programme.
• Rarely used
• Concept of “willingness to pay”
 Cost benefit ratio of a programme
Programme Expected cost Expected Cost benefit
in rs benefit in rs ratio

Small pox 10,000 110,000 1:11

vaccination

MCH 35000 210,000 1:6

Primary 12,000 50,000 1:4

schooling
Antismoking 10,000 60,000 1:6
 Thanks
• ------------------------------------------------------------.