Brief introduction to health economics
Health Economics
The science of health economics has significantly progressed in recent years. Although a lot of disagreement among health economists existed in the early nineties, over the recent years more consensus on methodology has been reached. This development resulted in a standardised approach, allowing valid comparisons of studies in different fields of health care and across countries. The main study types used in economic evaluation are cost-effectiveness (CEA) and cost-utility analysis (CUA) in which the incremental net costs of a programme are related to the incremental health benefits.
Cost-effectiveness analysis and Cost-utility analysis
CEAs measure health effects in physical units such as increments in life-years gained, infections averted, cases found, cases cured etc. In CUA, the incremental life-years gained are adjusted for quality of life, to arrive to a common measure known as quality adjusted life-year (QALY) or disability averted life-year (DALY). Costs are measured in monetary units. Cost-effectiveness or cost-utility ratios are expressed as net costs per unit of effect by comparing the new intervention with current practice (incremental analysis). In the United States no distinction is made between CEA and CUA, both types are referred as CEA.
Costing
Depending on the perspective of a health economic evaluation, different types of costs are considered. Generally, all health economic analyses include direct costs for medical care borne by the health system, community and patient?s families. Direct costs can either be program-related, such as tests in a screening programme or can be patient-related, such as hospital, outpatient and community care. Health economic analyses performed from the health care providers? perspective tend to focus on direct costs only. The current consensus in health economics is that a more complete model is achieved with the use of a societal perspective and therefore that all relevant costs and consequences for society should be considered, including productivity and leisure losses. However, discussion remains whether loss of productivity caused by morbidity and mortality should be incorporated as indirect costs or as quality adjustments in cost-utility analysis. Patient-related costs, direct as well as indirect, may transfer to benefits if illnesses and related costs are averted, for example through screening or treatment of blood products. The basic concept in health economic analyses is to evaluate the net costs, i.e. programme costs minus patient-related benefits. From a health economic viewpoint any new programme with negative net cost (offering overall cost saving programs) ? and non-negative health gains ? should be implemented since it is a dominant strategy. Positive net cost should be related to health gains such as life-years gained. To determine whether implementation is justified, the cost-to-health-gains (cost-effectiveness) ratio should be carefully considered and compared to acceptability thresholds, if available.
Discounting
As viral infections often involve serious complications requiring complex health-care interventions occurring several years after infection, the concept of discounting of future costs is relevant. Examples of long-term complications are cirrhosis after years of chronic hepatitis or development of AIDS in the late stage of HIV-infection. Discounting is a method to adjust future costs and benefits to their present value (cost and benefits are less weighted the farther in the future they accrue). The discounting procedure applies two major principles. Firstly, capital invested in a new technology could have been invested otherwise and may have gained interest. Secondly, there is a pure time preference with short-term benefits being preferred to future with respect to uncertainty as to whether one will be able to benefit from the monetary amount next year as one is now. The value of the discount rate should be chosen in accordance with marginal rates on investment and market interest rates. Many countries use average interest rates of long-term government bonds[15]. Often, discount rates are specified in the national guidelines for health economic research and vary between 3% for the USA to 6% for the United Kingdom.
Sensitivity Analysis
Sensitivity analysis is an important tool to investigate the outcomes obtained from health economic models. Whereas most parameters used in the models are derived from clinical trials or from retrospective data sources, others maybe based on individual expert opinions. Often, few parameters are known with a high degree of undisputed accuracy. To estimate the effect of uncertain variables on the robustness of the model results, sensitivity analysis is performed.