Lecture 5.1: Health Economics and Economic Evaluation

Question 1

What is Health Economics?

Answer 1

It is the study of how scarce resources are allocated among alternative uses for the care of sickness and the promotion, maintenance and improvement of health

Question 2

What are Resources?

Answer 2

They are basic inputs to production – time, abilities, capital, natural resources

Question 3

What is Scarcity?

Answer 3

Means that there are not enough resources to satisfy all demands and needs. It has 2 sides – the infinite nature of human wants and the finite nature of the resources available

Question 4

What is Economics?

Answer 4

It is the study of how individuals and societies choose to allocate scarce resources among competing alternative uses, and how to distribute the products from these resources

Question 5

How Can We Allocate Resources? (2)

Answer 5

• State as sole provider
• Free market

Question 6

When was the NHS set up?

Answer 6

1948

Question 7

Reimbursement of Doctors: Capitation

Answer 7

• Periodic, fixed payment per patient
• GPs rewarded for having a greater number of patients
  in their lists

Question 8

Reimbursement of Doctors: Salaries

Answer 8

• Fixed amount of money at the end of the period
• e.g. Consultants

Question 9

Reimbursement of Doctors: Fee For Service

Answer 9

• After performing a procedure, physician receives a set
  amount of money
• e.g. consultants in USA

Question 10

Aim of NHS

Answer 10

“Securing the provision of comprehensive, high quality care for all those who need it, regardless of their ability to pay or where they live”

Question 11

Systematic Methods for Rationing Healthcare Resources (7)

Answer 11

• Need
• Discrimination (e.g. by age, smokers …)
• Personal merit and social esteem
• Lottery
• Ability to pay (free market approach)
• Choose lowest cost treatments
• Choose treatments that are effective (Evidence based
  medicine)
• Cost-effectiveness (Economics based medicine)

Question 12

What is Economic Evaluation?

Answer 12

“The comparative analysis of alternative courses of action in terms of both their costs and their consequences”

Question 13

What is the outcome of cost-minimisation?

Answer 13

Equal effectiveness and safety of interventions

Question 14

What is the outcome of cost-effectiveness?

Answer 14

Natural units (e.g. life years, cases detected)

Question 15

What is the outcome of cost-utility?

Answer 15

Quality Adjusted Life Years (longevity and quality of life)

Question 16

What is the outcome of cost-benefit?

Answer 16

Monetary valuation of outcomes

Question 17

Measuring Health Outcomes: Natural Units (4)

Answer 17

• Cases detected (breast cancer screening)
• Cases prevented (cholesterol level lowering drugs)
• Symptom-free days (asthmatreatment)
• Life years gained (LYG)

Question 18

Measuring Health Outcomes: Quality Adjusted Life Years (2)

Answer 18

• Considers impact on length and quality of life
• Comparable across interventions

Question 19

Measuring Health Outcomes: Disability Adjusted Life Year (DALY)

Answer 19

• One DALY represents the loss of the equivalent of one
  year of full health
• DALYs for a disease or health condition are the sum of
  the years of life lost to due to premature mortality
  (YLLs) and the years lived with a disability (YLDs)

Question 20

How are QALYs constructed/calculated?

Answer 20

• Periods of time in less than full health are weighted on
  an interval scale of 0-1 (0=death,1=full health)
• This is the ‘utility’ value
• These weights are then multiplied by the duration of
  time spent in the health state to obtain QALYs
• Utility (u) x time in years (t) = QALY

Question 21

What is Opportunity Cost?

Answer 21

The potential benefits which are sacrificed when resources are committed to one purpose rather than another