HTA - lecture 3 - non medical costs Flashcards
direct costs within HC
medical costs
indirect costs within HC
downstream costs: costs during life years gained
direct costs outside HC
patients and family costs: informal care costs
indirect costs outside HC
productivity costs: judicial costs, special education
Productivity costs:
- “Costs associated with production loss and replacement due to illness, disability and death of productive persons, both paid and unpaid.”
productivity costs: what?
- Productivity cost aims at quantifying impact of illness on production of individuals in monetary terms
- Productivity cost does not entail valuing life as such, pain, fear, discomfort or ‘role-functioning’
- (sometimes mis-specified as “intangible cost”)
- These elements are captured in QALYs (non-monetarily)
why do we include these costs : pro
- Taking a societal perspective dictates incorporation of all relevant costs and effects
- PC are real and substantial societal costs
- Reduction of PC leads to real wealth increases
- Decision maker needs all available information
Multiplier effect
why do we include these costs : con
- Inclusion might favour health care programs for working individuals over others -> inequity –> people favoured over retired and younger people
- But wealth gains could be redistributed -> less inequity
- Recommendation: report PC separately, policymakers might choose specific weight per cost category
how to include these costs?
- three methods were proposed:
1. Transfer payments
2. Human capital method –> most popular one
3. Friction cost method
(US Panel method (Gold et al., 1996))
human capital method –> potential loss
- Uses (prognosis of) income as proxy for production losses
- Neoclassical economic theory suggests these are equal under perfect economic conditions = never unemployment
- Takes total time of absence (until retirement age) to determine length of relevant period
- Time absent * wage rate = total PC
transfer payments
not commonly used; transferred from one person to another, but no indication about real production, so don’t use this as proxy for productivity
* Sometimes productivity costs are set equal to sick pay (as costs for society of absence from work)
* BUT…
- Social benefits not equal to production value
- Social benefits = redistribution of wealth, not affecting scarce resources => no costs!
* (Transfer payments may have medium term economic impact, but are not proxy for this)
critique on HCM
- HCM estimates are maximum potential PC-losses
- Short term absence may not lead to HC-estimates of productivity costs due to:
- Colleagues taking over
- Making up after return to work
- Cancelling non-urgent work
- Long term absence may lead to lower productivity costs due to:
- Replacement by unemployed
- Reallocating workers and jobs
- Replacing labour by capital
- Hence, mechanisms in society that help to reduce the consequences of absence on productivity
- Productivity costs depend on length adaptation period
friction cost method (FCM)
- Short term absence:
- Production loss may be less than proportional with absence period (elasticity 0.8)
- Long term absence:
- Adaptation period equals vacancy period*
- Unemployment level (in different segments of labour market) is important
- Plus time needed before seeking and training
FCM continued
- Cost calculations based on the value of production (age and gender specific)
- Besides direct PC also medium-term macro-economic costs and replacement costs
- This method leads to much lower estimates of PC (FCM:HCM= 1:6), especially large differences for costs related to disability and premature death
HCM counts, FCM limited over time
three steps in costing in EE
- Which costs are relevant: identification
- How to measure these costs
- How to value these costs
