Economics and Health

Thomas Songer, PhD

South Asian CardiovascularResearch Methodology Workshop

Economics and Health

Human Development

Income/Economic

Population

Health & Nutrition

Education

Political

Transitions in Human Development

Epidemiologic Disease - Infectious to Chronic

Demographic Younger to Older populationsRural to Urban

Economic Developing to Developed Economies

Transitions in Human Development

Political Controlled to Free Market Economies

Health Care Systems Centralized to Decentralized, Cost Containment

Trends in Death in Developing Areas

0

10

20

30

40

1990 2000 2010 2020

Dea

ths

(mil

lion

s)

NCDs Comm. Dis. Injuries

Global Burden of Disease

DALYs in Developing Areas

1990 2020

Infectious Disease NCDs Injury

Economic Transition

Economic Growth• Many Differing ways of defining growth• Goods and services produced

• GNP - money value of all goods and services produced

• GNP per capita; reflects the average income of a country’s citizens

• GNP per capita; outlines general standard of living

Gross National Product, per capita

1991$

Average AnnualGrowth Rate,1980-91(%)

Sub-Saharan Africa 350 - 1.2East Asia & Pacific 650 6.1

South Asia 320 3.1Europe & C.Asia 2,670 0.9Mideast/N.Africa 1,940 - 2.4Latin America 2,390 - 0.3

OECD members 21,530 2.3World 4,010 1.2

GNP per capita

Monetary value of goods and services

population

GNP per capitaImpact of Population Changes

• An increasing population makes it more difficult to increase GNP per capita

• With a stable population, increases in GNP will increase GNP per capita

How does the development level of an

economy relate to health?

Economics and Health

Higher GNP per capita is associated with ….

Longer life expectancy

lower infant mortality

better access to safe water

better education

Sha

re o

f G

DP

spe

nt o

n he

alth

GDP per capita (1991 dollars)

2

4

6

8

10

12

0 5000 10000 15000 20000 25000

Income and Health SpendingWorld Bank Development Report

Poverty

malnutritionpoor sanitation

poor housing - crowdingno quality health care

Economics and Health

poor education

Low economic growth

Poverty

Poor health

Highfertility

UNDP Poverty Report 2000

OVERCOMING HUMAN POVERTY

Increased productivity

Risingincomes

Better health

Lowfertility

Economic growth

Economic development

Economic growthincrease in the amount of goods and

services produced

Economic developmentcombines economic growth with an

improvement in living standards

Economic growth does not always translate to economic

development

In the 1950s and 1960s, a large number of 3rd world countries

achieved UN growth targets, yet the levels of living for most

remained unchanged

GNP per capita is a narrow definition of growth and development

Todaro 1997

Health used to be viewed as an end product of the growth

process:

New thinking is that health enhances economic growth

Economics and Health

Economics and Health

WHO: Commission on Macroeconomics and Health

• Ill-health undermines economic development and efforts to reduce poverty. Investments in people’s health are vital pre-conditions for economic growth and human development.

www.who.int/macrohealth/en

The human being is an investment of capital

Healthy people are productive people

Chadwick:

Chadwick:

The human being is

Healthy people are productive people

Better sanitation is a good investment

Prevention of disease is a good investment

an investment of capital

• established in January 2000

• Mandate: To examine the links betweeninvestment in health, economic development and poverty reduction

• CMH Structure: 6 working groups, 18Commissioners, hundreds of experts in public health, finance and economics.

The Commission on Macroeconomics and Health

Summary of key CMH findings• Ill health undermines economic development and efforts for poverty reduction

• A few health conditions account for most of the avoidable deaths in low / middle-income countries

• HIV/AIDS, TB, malaria, maternal & child health, and tobacco-related illness

• The HIV/AIDS pandemic is a “distinct and unparalleled catastrophe” not only in its human dimension but in its implications for economic development

HIV/AIDS and Economic Development

• High HIV/AIDS prevalence leads to…– decline in labor force participation

– decline in productivity

– decline in human capital

HIV/AIDs in Russia, 2001

World Bank 2002

HIV/AIDs in Russia

• 5.4 to 14.5 million cases

• -2 to -14% change in effective labor supply

• -5 to -25% decline in GDP

by 2020

Health Economics

Why is there an interest inhealth economics?

Economics and health are related

Rising costs of health care

Limited resources for health care

Variations in health outcomes exist

Economic data influence governmentdecisions regarding health care

Economic Approaches in Health Care

DescriptiveCost studies

EvaluativeCost-Benefit AnalysisCost-Effectiveness Analysis

Cost-Utility Analysis

ExplanatoryDemand/Supply issuesRegulation/Taxation

Cost Effectiveness Analysis

• Primary form of economic analysis of health care interventions

• Very often included in clinical trials that are testing new interventions

• A method for evaluating the outcomes and costs of interventions designed to improve health.

Programme Consequences A

Costs A A

Costs B Comparator Consequences B

B

Choice

The purpose of economic evaluation, such as cost effectiveness analysis, is to identify, measure, value, and compare the costs and consequences of alternative interventions.

Cost Effectiveness Calculation

Comparison of interventions examines differences in cost by the differences in

benefits gained

Cost with intervention [A] - Cost with intervention [B]Cost with intervention [A] - Cost with intervention [B]Benefit with [A] - Benefit with [B]Benefit with [A] - Benefit with [B]

Δ CostCostΔ BenefitBenefit

in other wordsin other words

Cost Effectiveness Calculation

A B

Costs $4,000 $5,000

Effectiveness 3 months 8 months

Incremental CE = (5,000 – 4,000)/8-3= $200/month.

Intervention

Cost-effectiveness analysis – Important Steps

1. Define the question to be analyzed

2. Define the audience for the evaluation

3. Specify the perspective of the analysis

4. Define the relevant time frame for the analysis

5. Identify relevant outcomes

6. Identify relevant costs

7. Determine the summary measure to be reported

Defining interventions or the question to be assessed

• Major increase or decrease in an existing activity

Or

• Adding a new activity to replace an existing one or adding a new activity when there is no current activity

Mulligan/Mills

Selected interventions in malaria controlDrug use • Early diagnosis and effective treatment

• Intermittent therapy during pregnancy• Chemoprophylaxis for target groups

Personal & CommunityProtection

• Insecticide treated materials• Home repellants and insecticide use

Vector control

• Indoor residual spraying• Larviciding, fogging• Civil engineering: drainage and filling

Social Action/ Management effectiveness

• Mobilization of individual, family and communities

• Health Education• Surveillance of infection and disease• Monitoring and evaluation of programsMulligan/Mills

Defining the Audience and Perspective of the study

• Health care payers

• Health care providers

• Patients

• Government health plans

• Society

• among others

Identify Time frame

• Short-term– Within the time period of the trial

• Long-term– e.g 5 years– e.g. 10 years

• Lifetime– Many interventions in chronic disease show

benefits years later

Summary Outcome Measures• Quality-adjusted Life Years

Survival weighted by patients’ value of health-related quality of life

Patients value health states on a 0 (death) to 1 (optimal health) scale

Recommended as a gold standard

• Other Clinical Outcomes: pain, test results

• Non-Clinical Outcomes: health status, patient satisfaction

Logan et al. (1981) Hypertension mmHg Hypertension 3:2:211-18 treatment blood pressure

reduction

Hull et al. (1981) Diagnosis of deep cases of DTV NEJM 304:1561-67 vein thrombosis detected

Sculpher and Buxton (1993) Asthma episode-free PharmacoEconomics 4:5:345-52 days

Mark et al. (1995) Thrombolysis years of life NEJM 332:21:1418-24 gained

Examples of outcome measuresExamples of outcome measures

Cost-Effectiveness Analysis in the TODAY (Treatment Options for Diabetes in

Adolescents and Youth) Study

• Results expressed as– Cost per change in HbA1c– Cost per unit of treatment failure

• e.g. cost per day of treatment failure avoided– Cost per unit of clinical improvement

• e.g. change in weight, BMI, obesity– Cost per quality-adjusted life year (QALY)