chapter 4 Flashcards
(55 cards)
1
Q
Society making optimal use of scarce resources to help satisfy changing wants & needs.
A
I. Economic Efficiency
2
Q
Society making optimal use of scarce resources to help satisfy changing _
A
wants & needs.
3
Q
- The economic criterion for maximizing well-being is
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to maximize the sum of the consumer and the producer surplus.
4
Q
- Total Welfare =
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Consumers’ Surplus + Producers’ Surplus
5
Q
- It is the process of systematic identification, measurement, and valuation of the inputs and outcomes of two alternative activities, and the subsequent comparative analysis of these in order to assist policy decisions.
A
Economic Evaluation
6
Q
heart of an economic evaluation because making choices is central to economics.
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Existence of alternatives
7
Q
- Health care programs take inputs (labor, capital, etc.) and transform them into WHAT
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outputs
8
Q
measure is called ‘costs’ and it is in monetary units.
A
- Input
9
Q
called ‘effects’ and expressed in natural units (such as a percentage detection or completion ratio)
A
- Outputs
10
Q
- Broader measure of effects relies on ‘utilities’ and the output unit is called
A
a ‘quality adjusted life year’ (the satisfaction of the time that a person has left to live).
11
Q
(the satisfaction of the time that a person has left to live).
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a ‘quality adjusted life year’
12
Q
- Output expressed in monetary units as the costs, in which case the consequences are now called ‘WHAT’.
A
benefits
13
Q
- Any negative effect resulting from the implementation of the project
A
COST
14
Q
any positive effect on the organization resulting from the implementation of the project.
A
BENEFIT
15
Q
How do we measure cost?
A
Step 1: Identify the category of cost
Step 2: Gather cost data
Step 3: Add up all cost
16
Q
Directly related to the health care industry (the doctors, the hospitals and the patients).
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- DIRECT COST
17
Q
Inputs and outputs that pass outside the health care industry.
A
- INDIRECT COST
18
Q
- The main measure of these indirect effects is via
A
earnings forgone or enhanced due to treatment, as the earnings reflect the value of production lost to, or gained by, the rest of society.
19
Q
provides one good method for evaluating proposed public projects.
A
- Cost-benefit analysis (CBA)
20
Q
measures the benefits and costs of projects in money terms.
A
- Cost-benefit analysis (CBA)
21
Q
- This often requires that we place dollar values on years of life or improvements in health and well-being.
A
- Cost-benefit analysis (CBA)
22
Q
emerged as the principal alternatives to CBA.
A
- Cost-effectiveness analysis (CEA) and cost-utility analysis (CUA)
23
Q
- The basic idea of WHAT analysis mirrors the measurement problems that it addresses.
A
cost-benefit
24
Q
WHAT rests on the premise that a project or policy will improve social welfare if the benefits associated with it exceed the costs.
A
- CBA
25
T OR F
* Benefits > Costs
T
26
* We can also rank projects according to the WHAT
benefit to cost (B/C) ratio;
27
T OR F
a lower B/C ratio generally indicates a project that will deliver greater social benefits for a given dollar of costs.
f higher b/c ratio
28
* As in standard economic theory, costs are measured as _
opportunity Costs
29
T OR F
The most common difference between public and private project evaluation is that public projects often have opportunity costs that have no market to serve as a guide for pricing.
T
30
Problems in CBA
1. Much of the controversy of CBA derives from the imprecise task of placing dollar values on these difficult-to-evaluate costs and benefits.
2. Public investments may have side effects that impose additional measurement difficulties.
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* The costs of materials and manpower can be measured directly, and the benefits to those immunized can be estimated.
public immunization program
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* The program, however, also benefits people who never get immunized by reducing the number of infected carriers, thus reducing their exposure to the disease.
* EXTERNAL BENEFIT
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Steps in CBA
1. Step 1: Define the objective of the intervention.
2. Step 2: Define the baseline, that is, what would happen if no action is taken.
3. Step 3: Define the alternative options to achieve the objective.
4. Step 4: Quantify the investment costs of each option compared to the baseline.
5. Step 5: Identify and quantify the positive and negative welfare effects of each alternative option compared to the baseline.
6. Step 6: Value the welfare effects in monetary terms, using market prices and economic valuation methods.
7. Step 7: Calculate the present value of costs and benefits occurring at different points in time using an appropriate discount rate.
8. Step 8: Calculate the Net Present Value (NPV) or Benefit/Cost (B/C) ratio of each alternative option.
9. Step 9: Perform a sensitivity analysis.
10. Step 10: Select the most efficient intervention option
34
CBA STRENGTHS
Strengths
* Systematic way of thinking and analysis
* Focus on use of scarce resources
* Strong methodological basis
* Monetary measurement provides comparison
* Appeal to policy makers
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CBA LIMITATIONS
* Uncertainty of all parameters used
36
Why CBA?
* It provides a consistent framework for deciding when interventions are desirable or not.
* To estimate the benefits, in monetary terms, of proposed policy changes in order to inform decision making.
* Estimating benefits in monetary terms allows the comparison of different types of benefits in the same units.
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an economic evaluation in which consequences of different interventions are measured using a single outcome, usually in 'natural' units (for example, life- years gained, deaths avoided, heart attacks avoided or cases detected).
2. Cost-effective analysis
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* Alternative interventions are then compared in terms of cost per unit of effectiveness.
2. Cost-effective analysis
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* It indicates which interventions provide the highest 'value for money' and helps them choose the interventions and programmes which maximize health for the available resources.
CEA in healthcare
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PURPOSE AND OBJECTIVES OF CEA
To compare alternative programs with a common health outcome
To assess the consequences of expanding an existing program.
To identify the most cost-effective intervention from a group of alternatives
To provide empirical justification for a program
To identify and exclude programs that is wasting resources.
To evaluate the interventions in terms of efficacy (cost effective ratio), absolute health gain and affordability (absolute cost)
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Drawback of Cost-Effectiveness Analysis
o It does not facilitate comparisons across different diseases when different outcomes have been used.
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* The proper comparison of costs per output in CEA is based on the
ratio of incremental costs to incremental output, as noted in equation.
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CEA RATIO
C1-C0/ E1-E0
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an economic evaluation in which the incremental cost of a program from a particular point of view is compared to the incremental health improvement expressed in the unit of quality adjusted life years (QALYs).
3. cost-utility analysis
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was developed to address the problem of conventional CEA, which did not allow decision-makers to compare the value of interventions for different health problems
* CUA
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STEPS IN CUA ANALYSIS
1. Step 1: Identification of 2 or more alternatives
2. Step 2: Identification of Perspectives
3. Step 3: Determination of Costs
4. Step 4: Determination of Outcomes in Utility Terms
QALY: Quality Adjusted Life Years
DALY: Disability Adjusted Life Years
5. Step 5: Calculation of cost-utility ratio
6. Step 6: Decision making
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QALY:
Quality Adjusted Life Years
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DALY:
Disability Adjusted Life Years
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able to combine the effects of health interventions on mortality and morbidity into a single index thereby providing a common currency to enable comparisons across different disease areas
QALY
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* The QALY is a weighting system that assigns a value, q, ranging WHAT to represent quality of life for each year.
From 1 (perfect health) to 0 (death)
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COST BENEFIT ANALYSIS
COST OF INTERVENTION?
OUTCOME?
CONCERN?
COST BENEFIT ANALYSIS
COST OF INTERVENTION: MONETARY UNITS
OUTCOME: VALUED IN CASH TERMS
CONCERN: NETCOST: BENEFIT RATIO
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COST EFFECTIVENESS ANALYSIS
COST OF INTERVENTION?
OUTCOME?
CONCERN?
COST OF INTERVENTION: MONETARY UNITS
OUTCOME: QUALITATIVE NON-MONETARY UNITS
CONCERN: COST PER UNIT OF CONSEQUENCES OR COST PER YEARS OF LIFE GAINED/SAVED
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COST UTILITY ANALYSIS
COST OF INTERVENTION?
OUTCOME?
CONCERN?
COST UTILITY ANALYSIS
COST OF INTERVENTION: MONETARY UNITS
OUTCOME: VALUED AS UTILITY
CONCERN: COST PER UNIT OF CONSEQUENCES OR COST PER QALY
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Example: The pain and suffering that are caused by a healthcare intervention
what category of cost?
intangible
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_ also addresses public choices involving either benefits or costs that are external to the market they came from
CBA
