WHY WE NEED COST-WHY WE NEED COST-EFFECTIVENESS ANALYSISEFFECTIVENESS ANALYSIS

Dr. Gary Ginsberg

MAKE DECISIONSMAKE DECISIONS

Day CareDay Care PreventionPrevention SurgerySurgery Topical FLTopical FL Infectious Infectious

DisceasesDisceases

CancerCancer

HospitalisationHospitalisation TreatmentTreatment MedicationMedication Public FLPublic FL Non-Connuncable Non-Connuncable

DiseasesDiseases CVDCVD

NETWORKINNETWORKINGGPressure GroupsPressure GroupsPoliticsPoliticsDisease ClubsDisease Clubs

FALSE COMPARATIVE FALSE COMPARATIVE NEEDNEED

CERVICAL CANCER CERVICAL CANCER SCREENING GIVEN in SCREENING GIVEN in ISRAEL DESPITE LOW ISRAEL DESPITE LOW INCIDENCE…..INCIDENCE…..

lobbistslobbists

PRESSURE GROUPSPRESSURE GROUPS

BETASERON (MS)BETASERON (MS)BREAST CANCERBREAST CANCERCHILD CANCER CHILD CANCER

(emotive)(emotive)

11

6

43 3 3 2

0

2

4

6

8

10

12

0 5 10 15 20 25 30

YEARS DELAY

COST-BENEFIT RATIO

Fig 4:Fig 4: CBA LIFELONG BETASERON PER PERSON CBA LIFELONG BETASERON PER PERSON(BY DELAY IN REACHING WHEELCHAIR(BY DELAY IN REACHING WHEELCHAIR

REQUIRING WHEELCHAIR)REQUIRING WHEELCHAIR)

BETASERON FOR BETASERON FOR MSMS

WEAKENS RELAPSES…scans betterWEAKENS RELAPSES…scans better 3 days less hospitalization ($1,200) 3 days less hospitalization ($1,200)

for cost of $20,000 annuallyfor cost of $20,000 annually IN COURT: WHEELCHAIRED MS IN COURT: WHEELCHAIRED MS

SUFFERER vs MINISTRY BUREAUCRAT SUFFERER vs MINISTRY BUREAUCRAT who can’t explain opportunity costswho can’t explain opportunity costs

FDA looking at TEVA’s COPAXONEFDA looking at TEVA’s COPAXONE

GIVEN BECAUSE OF LOW GIVEN BECAUSE OF LOW DEMANDDEMAND

" THE IMPORTANCE OF " THE IMPORTANCE OF BEING UNIMPORTANT"BEING UNIMPORTANT"

RILUZOLE (ALS) & PULMOZINE (CF)

AIDSAIDS

Huge Global ProblemHuge Global Problem ARV cost $800 per year ARV cost $800 per year

(of less than optimal quality (of less than optimal quality life…life…

Country X in AfricaCountry X in Africa

$8,000,000 from $8,000,000 from international foundationinternational foundation

Keep 10,000 people with Keep 10,000 people with AIDS alive for ONE year AIDS alive for ONE year

S.Pneumonia VaccineS.Pneumonia Vaccine

$10 per life year saved$10 per life year saved Save 800,000 life yearsSave 800,000 life years 10,000 children alive for 10,000 children alive for

80 years80 years By focussing on AIDS the By focussing on AIDS the

country may lose 790,000 country may lose 790,000 life years! life years!

AIDS – wider problemsAIDS – wider problems should be incorporated in should be incorporated in CEACEAOrphan problem………..Orphan problem………..Demise of Economies Demise of Economies Demise of Demise of

Communities…………………Communities…………………AIDS PREVENTION MAY BE AIDS PREVENTION MAY BE

BETTER STRATGY?BETTER STRATGY?

PLANNINGPLANNING relies on BUREAUCRACIES, relies on BUREAUCRACIES,

HEALTH MINISTRIES, REGIONAL HEALTH MINISTRIES, REGIONAL HEALTH CENTERS, HINDERED BY HEALTH CENTERS, HINDERED BY PRESSSURE GROUPSetc.PRESSSURE GROUPSetc.

INEFFICIENT, suffers from INEFFICIENT, suffers from NEPOTISM, POLITICAL NEPOTISM, POLITICAL INFLUENCES, OVERSTAFFING etc.INFLUENCES, OVERSTAFFING etc.

USE FREE MARKETUSE FREE MARKET

No Bureaucracy No Bureaucracy Consumers can Consumers can

choose to buy choose to buy servicesservices

Providers will provide Providers will provide required servicesrequired services

THE INVISIBLE HAND THE INVISIBLE HAND (Adam Smith, Wealth (Adam Smith, Wealth of Nations).of Nations).

BUT BUYING BUT BUYING HEALTH CARE HEALTH CARE

IS NOT THE SAME IS NOT THE SAME AS BUYING AS BUYING FRUITS AND FRUITS AND VEGETABLES!VEGETABLES!

UNATTAINABLE UNATTAINABLE UTOPIASUTOPIAS Just as perfect COMMUNISM, Just as perfect COMMUNISM,

based on CENTRALISED based on CENTRALISED PLANNING, does not work for PLANNING, does not work for various reasons….various reasons….

So, perfect CAPITALISM based So, perfect CAPITALISM based on the FREE MARKET does not on the FREE MARKET does not work in health….because of work in health….because of MARKET FAILURESMARKET FAILURES

Small problems with Small problems with MarketMarket

People with no People with no INCOMEINCOME

ChildrenChildren Mentally IllMentally Ill UnconsiousUnconsious

INCOME INCOME MAINTENANCE MAINTENANCE PROGRAMESPROGRAMES

Adults decideAdults decide Profession Profession

decidesdecides Next of KinNext of Kin

MMONOPOLYS/OLIGOPOLYSONOPOLYS/OLIGOPOLYS

Ideal market is based on MANY Ideal market is based on MANY providers, perfect competition providers, perfect competition drives down prices.drives down prices.

HEALTH is full of MONOPOLYS or HEALTH is full of MONOPOLYS or OLIGOPOLY (even market stall OLIGOPOLY (even market stall cartels) so suppliers can price FIX.cartels) so suppliers can price FIX.

HOSPITAL IN RURAL AREAHOSPITAL IN RURAL AREA HIGH-TECH, PET, LITHTRIPTOR etcHIGH-TECH, PET, LITHTRIPTOR etc

MONOPOLYS/MONOPOLYS/OLIGOPOLYS:OLIGOPOLYS: ADAM SMITH “THE WEALTH ADAM SMITH “THE WEALTH

OF NATIONS” IN THE 18th OF NATIONS” IN THE 18th Century.Century.

““MEN OF THE SAME MEN OF THE SAME PROFESSION SELDOM GET PROFESSION SELDOM GET TOGETHER, EXCEPT TO TOGETHER, EXCEPT TO CONSPIRE TO RAISE PRICES”CONSPIRE TO RAISE PRICES”

MARKET FAILURES # 1 MARKET FAILURES # 1 AGENCY RELATIONSHIPAGENCY RELATIONSHIP

IN THE FRUIT MARKET, the consumer IN THE FRUIT MARKET, the consumer has KNOWLEDGE (about the has KNOWLEDGE (about the marginal utility or happiness points marginal utility or happiness points s/he will get from buying apples).s/he will get from buying apples).

IF s/he has money! Will calculate if IF s/he has money! Will calculate if

Expected Marginal Utility > Marginal Expected Marginal Utility > Marginal Disutility of money (or Price) Disutility of money (or Price)

MARKET FAILURES # 1 MARKET FAILURES # 1 AGENCY RELATIONSHIPAGENCY RELATIONSHIPWill purchase 1,2 or 10 kilos of Will purchase 1,2 or 10 kilos of

apples up to where MB=MC. apples up to where MB=MC. Stall owner will run and serve Stall owner will run and serve him, even with peaches and him, even with peaches and bananas.bananas.

CONSUMER SOVEREIGNTYCONSUMER SOVEREIGNTY

““THE CONSUMER IS KING”THE CONSUMER IS KING”

MARKET FAILURES # 1 MARKET FAILURES # 1 AGENCY RELATIONSHIPAGENCY RELATIONSHIP

IN HEALTH, the patient LACKS IN HEALTH, the patient LACKS KNOWLEDGE, the MD has KNOWLEDGE, the MD has studied for 5-12 years.studied for 5-12 years.

MD ACTS AS AGENT FOR MD ACTS AS AGENT FOR PATIENT BOTH SUPPLING & PATIENT BOTH SUPPLING & DEMANDING SERVICESDEMANDING SERVICES

MARKET FAILURES # 1 MARKET FAILURES # 1 AGENCY RELATIONSHIPAGENCY RELATIONSHIPThis gives MD tremendous POWER, This gives MD tremendous POWER,

which can be abusedwhich can be abused

There is NO MARKET of consumer There is NO MARKET of consumer demanding and PRODUCER supplyingdemanding and PRODUCER supplying

MD has income MD has income maintainance/maximising incentivemaintainance/maximising incentive

Leads to EXCESS PROVISION OF Leads to EXCESS PROVISION OF UNNECESSARY SERVICESUNNECESSARY SERVICES

CHOLYSECTOMIES PER 100,000

0 100 200 300 400 500 600 700

Canada

USA

USA HMO's

Europe

Israel

FFS + FULL INSURANCE

FFS + PART INSURANCE

PRE-PAID INSURANCE+SALARIES

PUBLIC + SALARIES

PUBLIC + SALARIES

MORTALY ALSO HIGHER

BUNKER’s BUNKER’s LAWLAW

If there is an excess of If there is an excess of physicians AND they are paid physicians AND they are paid FEE-FOR-SERVICE FEE-FOR-SERVICE then………………………………………then………………………………………….….

””There will NOT be ONE There will NOT be ONE FALLOPIAN TUBE, APPENDIX or FALLOPIAN TUBE, APPENDIX or WOMB left in the population”WOMB left in the population”

C-SECTIONSC-SECTIONS MULTI-CAUSAL MULTI-CAUSAL

Defensive medicineDefensive medicine

Doctor’s convenience (before 4pm) Doctor’s convenience (before 4pm)

Previous SectionPrevious Section

IncomeIncome

PROBABILITY = 1% x $INCOME/$1000PROBABILITY = 1% x $INCOME/$1000

8%-12% necessary8%-12% necessary

DECISION FOR OPERATION

0% 20% 40% 60% 80% 100%

1

YES MAYBE NO

SALARIED

FEE-FOR-SERVICE

?

MARKET FAILURES MARKET FAILURES #2 EXTERNALITIES#2 EXTERNALITIES

FREE MARKET CONSUMER WEIGHS UP FREE MARKET CONSUMER WEIGHS UP His/Her MB and MC, unless they are His/Her MB and MC, unless they are “righteous/saintly” they ignore “righteous/saintly” they ignore BENEFITS TO OTHER members of BENEFITS TO OTHER members of society.society.

Vaccine COSTS=$100 BENEFITS=$80Vaccine COSTS=$100 BENEFITS=$80

so DOES NOT PURCHASE vaccinationso DOES NOT PURCHASE vaccination

MARKET FAILURES MARKET FAILURES #2 EXTERNALITIES#2 EXTERNALITIES

BUT VACCINE COULD GIVEBUT VACCINE COULD GIVE

100 other persons benefit of $1 100 other persons benefit of $1 eacheach

SOCIETY: B=80+100>Costs=$100 SOCIETY: B=80+100>Costs=$100

SO vaccination should be done!SO vaccination should be done!

MAJOR MAJOR MARKET MARKET FAILURESFAILURES

AGENCY RELATIONSHIPAGENCY RELATIONSHIPCAUSES AN OVERSUPPLYCAUSES AN OVERSUPPLY OF UNESSENTIAL SERVICES OF UNESSENTIAL SERVICES

EXTERNATITIES CAUSE ANEXTERNATITIES CAUSE AN

UNDERSUPPLY OF ESSENTIALUNDERSUPPLY OF ESSENTIAL

SERVICESSERVICES

HAVE TO USE HAVE TO USE PLANNING IN HEALTHPLANNING IN HEALTH

As we cannot rely on market As we cannot rely on market to make decisions, we have to to make decisions, we have to use PLANNING tools such as:-use PLANNING tools such as:-

COST EFFECTIVENESS COST EFFECTIVENESS ANALYSISANALYSIS

COST-UTILITY ANALYSISCOST-UTILITY ANALYSIS

COST-BENEFIT ANALYSISCOST-BENEFIT ANALYSIS

GOALS OF HEALTH GOALS OF HEALTH SYSTEMSYSTEM

Health systems have multiple Health systems have multiple goals, but they fundamentally exist goals, but they fundamentally exist to improve healthto improve health

Health systems with similar per Health systems with similar per capita expenditures show wide capita expenditures show wide variations in population health variations in population health outcomes, partly due to non-health outcomes, partly due to non-health system factors like education….system factors like education….

POTENTIAL FOR IMPROVEMENTPOTENTIAL FOR IMPROVEMENTIN HEALTH STATUS:IN HEALTH STATUS:

CULYER: (relates needs to output)

100

50

0 AGE

HSI

LIMP

Natural Healing

Medical Intervention for Broken Leg

POTENTIAL FOR AVOIDANCE OFPOTENTIAL FOR AVOIDANCE OFREDUCTIONS IN HEALTH REDUCTIONS IN HEALTH STATUS:STATUS:

CULYER: (relates needs to output)

100

50

85

0

Victim

Epidemic

Victim

INNOCULATIONINNOCULATIONAGE

HSIHealthy Profile

WHY DIFFERENCES?WHY DIFFERENCES?

Partly explained by some Partly explained by some systems devoting resources systems devoting resources to expensive interventions to expensive interventions with small effects on with small effects on population health, while low population health, while low cost interventions with cost interventions with potentially greater benefits potentially greater benefits are not fully implemented.are not fully implemented.

WHY WE NEED CEA…..WHY WE NEED CEA…..

CEA (including CUA) can be used CEA (including CUA) can be used to improve the performance of a to improve the performance of a health system. Indicates which health system. Indicates which interventions provide the interventions provide the highest "value for money", highest "value for money", helping policymakers choose helping policymakers choose interventions which maximise interventions which maximise health within the available health within the available resource constraint. resource constraint.

CEA requires CEA requires information on….information on…. The extent to which current The extent to which current

and potential interventions and potential interventions improve population health, improve population health, i.e. effectiveness.i.e. effectiveness.

The resources required to The resources required to implement the interventions, implement the interventions, i.e. costs.i.e. costs.