Costs and Cost Effectiveness

1
Costs and Cost Effectiveness

• HINF 371 - Medical Methodologies
• Session 15

2
Objective

• To review the relationship between healthcare
  costs and practice guidelines
• To understand the possible impact of guidelines
  with cost assessment

3
Context

• Healthcare costs are increasing
• This is no problem if people willing to pay more
• There is a tendency to pass the costs to others
• Patients expect the latest and the best
  technologies no matter how expensive, how small
  or uncertain the benefit
• We will pay no matter what because the costs will
  not disappear

4
Guidelines and Costs

• A guideline can consider costs and recommend a
  practice only if it is cost effective
• A guideline would recommend a practice only if
  its benefits outweigh its harms

5
How to regulate

• Free market for balancing the costs with values
• Insurance causes over consumption
• People consume if they dont pay
• Collectively everyone overconsumes, the result in
  the aggregate is not good for anyone.
• Collectively the cost people end-up paying for
  healthcare exceed the value of what they are
  receiving in return
• But
• Decisions to be made by consumers
• The value and costs of goods must be known
• They pay the full cost and receive the full
  benefit

6
What to do?

• Guidelines may contribute linking value to costs,
  
• They can provide essential information
• They can provide costs
• If costs are excluded from guidelines who will do
  it?
• Society what is society?
• Practitioners and Patients?
• Or no one?
• If they are included in guidelines
• Safety in numbers
• Standard practice

7
Can guidelines contain costs

• Limited information on economic outcomes and
  health outcomes
• Guidelines are only one cost element Medical
  education, Human resources, Facilities planning,
  Efficiency of operations, financial and
  professional incentives
• People still ignore and continue to overconsume

8
Patients and to be patients to be asked

• The change of MI next year is 0.005
• The possibility of death decreased from 9 percent
  to 8 percent with HINF medication
• Insurance for HINF is 50
• The cost of HINF medication is 10,000

9
Patients and to be patients to be asked

1. Are you willing to pay 50?
2. Would you be willing to pay 10,000?
3. Are you going to pay 10,000?
4. No payment but your premiums will increase next
   year, do you want to receive the drug?
5. Are you willing to pay up front 10,000, in case
   you should have a MI?

10
Decision steps

1. Estimate health outcomes
2. Ask patients if the benefits outweigh the harms?
3. If no, stop.
4. If yes, estimate the cost of intervention
5. Is the value higher than the cost?
6. If yes, use, recommend and cover
7. If no, do not use recommend and cover
8. Adhere to decision

11
Cost Effectiveness Analysis

• Estimating and valuing the resources used for
  interventions against the costs incurred
• Cost effectiveness values health effects in
  monetary terms and makes it comparable
• The true cost of an intervention is its
  opportunity cost.

12
Decision makers challenge

• Choosing the interventions that produce the most
  health for the resources spent.
• Comparing alternatives and decide which
  interventions, for whom and at what intensity are
  the best use of medical resources

13
Whose Perspective?

• Societal perspective is appropriate for analyses
  that are designed to inform decisions made in the
  public interest about the broad allocation of
  medical resources
• All significant costs and health effects must be
  considered, micro costed, based on critical path,
  and discounted
• A time horizon must be established and a cohort
  must be selected
• Ratio must include net health benefits and net
  costs of two alternatives

14
Compared to what?

• Propranolol 51 life years/1M
• Pap smear every 3 years 36
• By-pass surgery 93
• Lovastatin 1
• Influenza vaccine for 65 - 7,750
• CCU for low risk patients 2
• Total hip replacement 165
• Tetanus booster every 10 years - 4

15
Compared to what
P vac. No Vac Difference
Costs
Vaccination 12 0 12
Adverse effects 0.01 0 0.01
Treatment 76.41 96.69 -20.28
Total 88.42 96.69 -8.27
Effects
Quality adjusted Days 2,273.26 2,272.05 1.21
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Better Cost effectiveness model

1. Structure of model should make sense to experts
2. The model should replicate the outcomes
3. Models predictions should correspond well with
   results of studies used in its construction
4. To use the model to predict outcomes for a new
   program and compare the predictions with
   experience under the program