Session 7: Defining & Assessing
Benefits for Economic Evaluation
1. Why, what and how of benefits.
2. Benefit assessment for CEA.
3. Benefit assessment for CUA.
4. Practical exercise in estimating benefits for CUA.
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Why Measure Benefits?
Maximise benefits for given resources
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Key Features of Economic Evaluation
Economic evaluation is
“The comparative analysis of alternative
courses of action in terms of both their
costs and consequences in order
to assist policy decisions”.
1. Costs and consequences - efficiency!
2. Comparative - relative efficiency
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Direct Benefits Indirect Benefits
Improved Family and
services Savings in
patient health friends quality
resource use productivity.
status / utility. of life.
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Should Changes in Productivity be
May depend upon viewpoint (govt., societal, NHS)
Main issues are level of „true‟ loss and comparability
• Measurement of value of loss (gross wage, friction cost)
• Double-counting, especially with CUA/CBA
• Comparability with „health‟ focus (viewpoint again)
• Comparability with other studies (applies to other variables also)
• Provide a good reason why they should be measured/included
• Report separately from other results
• Differentiate measurement and valuation
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Should Benefits be Discounted?
Why not discount?
• Health, unlike resources, cannot be traded over time
• Inter-generational equity (cf environmental economics)
• If are discounted, may be different rate to cost
• Inconsistent treatment costs and benefits
• Inconsistent policy, especially in comparison with other sectors
• Counter-intuitive conclusions for investment. eg always postpone!
• Individuals do trade health over time ((dis)invest in health)
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Negative And Positive Benefits
C/E ratio = net cost/net benefits
Net cost = positive cost + negative cost
Net benefit = positive benefit + negative benefit
Negative cost = cost saving, eg reduced LoS
Negative benefit = reduced health, eg adverse event
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Types of Economic Evaluation
Type of Analysis Costs Consequences Result
Identical in all Least cost
Cost Minimisation Dollars
Different magnitude of a Cost per unit of
common measure eg.,
Cost Effectiveness Dollars LY’s gained, blood
consequence eg. cost
pressure reduction. per LY gained.
Single or multiple effects not Cost per unit of
Cost Utility Dollars necessarily common. consequence eg. cost
Valued as “utility” eg. QALY
As for CUA but
Cost Benefit Dollars valued in money. eg
cost: benefit ratio.
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How Can Health Be Measured?
Length of life
• Mortality (numbers, rates, SMRs)
• Life expectancy
• Life years lost
Quality of life
• Numerous QoL measures (generic and specific)
• SF-36, Nottingham Health Profile, Guttman Scale, Rotterdam
Symptom Checklist, Hospital Anxiety and Depression scale etc….
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Process of Benefit Assessment
1. Identification: Mortality.
Quality of life.
2. Measurement: Measure in natural physical units
(eg. number of deaths averted).
3. Valuation: Value benefits if appropriate ie. if
performing CUA or CBA.
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Issues in Assessing Benefits for CEA
1. Efficacy vs effectiveness vs efficiency.
2. Intermediate versus final outcome.
3. Sources of data for CEA.
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Efficacy Vs Effectiveness Vs
Efficacy = measure of effect under ideal conditions.
Effectiveness = effect under „real life‟ conditions.
Efficacy does not imply effectiveness
Efficiency = relationship between costs & benefits.
Effectiveness does not imply efficiency
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Intermediate Vs Final Outcome
Final = change in health (status) resulting from the
Intermediate = change in clinical indicator resulting from the
Need to establish causal link between
intermediate and final outcome measure.
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Examples of Intermediate Vs Final
Outcomes Indicators (PBAC (PBS) Oz)
Condition being Final outcome Surrogate Outcome Indicators
Coronary thrombosis Quality-adjusted Number surviving Number with specified Number achieving coronary
(thrombolysis survival level of left ventricular re-perfusion
Stable angina Quality-adjusted Number with Number who can walk Number with adequate
(various interventions) survival acceptable a specified distance relief of pain
quality of life
Asthma Quality-adjusted Number surviving Number with adequate Number achieving a target
(various drugs) survival control of bronchial level of airways functions
Depression Quality-adjusted Number avoiding Quality of life (may be Number achieving a target
(various drugs) survival suicide improved by drugs) Hamilton or Montgomery-
Asberg Depression Rating
Hypertension Quality-adjusted Number avoiding Quality of life (may be Number achieving a target
(various drugs) survival a stroke worsened by drugs) blood pressure
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Sources of Effectiveness Data
1. Clinical trials, eg RCT‟s.
2. Epidemiological studies, eg cohort studies.
3. Synthesis methods, eg meta-analyses.
4. Use of modelling.
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Randomised Controlled Trials
„Gold standard‟ - minimal bias and confounding.
1. Often establishes efficacy, not effectiveness.
2. Selective subjects used.
3. Limited opportunity to conduct.
4. Limited time horizon.
5. Costly to conduct.
6. Often unethical and/or unfeasible.
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Real life setting - establish effectiveness
1. Potential for significant bias and confounding.
2. Causal link can be weak.
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Decision Rules: CEA
CEA result = CEI (c/e). eg cost per LY gained
Decision rule = adopt lowest CEI
Application = technical efficiency
Qst addressed = “Should we undertake program “X” or
program “Y” to treat condition “A”?
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Limitations of Measurements/Need for Valuation
Ambiguity in assessing overall improvement or
detriment in health
Allocative efficiency - value of benefits >
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Valuation Versus Measurement
Value is determined by benefits sacrificed
elsewhere (weighted preference)
Valuation requires a trade-off between benefits
- measurement does not
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Methods of Valuing Health
„Utility‟ or „preference‟ assessment
• Quality-Adjusted Life Years (QALYs)
• Variants on QALY - Years of Health Life (YHL), Health-Adjusted
Person Years (HAPY), Health-Adjusted Life expectancy (HALE)
• Healthy-Year Equivalents (HYEs) (based on „sequence‟ of SG)
• Saved-young-life equivalent (SAVE) (based on PTO)
Monetary terms eg WTP
• Willingness-to-pay (WTP)
• Human Capital
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Quality Adjusted Life Years
Adjusts data on quantity of life years saved to
reflect a valuation of the quality of those years
If healthy: QALY = 1
If unhealthy: QALY < 1
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0 5 10 15
No Life Years = 15
No QALYs = 11
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Identify possible health states - cover all
important and relevant dimensions of QoL
Derive „weights‟ for each state
Multiply life years (spent in each state) by „weight‟
for that state
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Utility = satisfaction/well-being - reflects a consumers
Utility weights are necessarily subjective - they elicit
an individual‟s preferences for, or value of, one or
more health states.
Must: 1. Have interval properties
2. Be „anchored‟ at death and
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Techniques For Measuring “Utility”
Variety of techniques available, including:
Time Trade off
Person Trade Off
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Obtaining “Utility” Weights
Two means of obtaining “utility” weights:
1. Evaluation specific/‟holistic‟ measures - develop evaluation
specific („holistic‟) description of health state and then
derive weight for that specific state directly by population
2. Use „generic‟ or „multi-attribute‟ instruments - use
predetermined weights, based on combination of
dimensions of health yielding a finite number of health
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Evaluation Specific/„holistic‟ Measure
Advantages: 1. Sensitive
2. Account for wider QoL
(eg process, duration, prognosis)
Disadvantages 1. Cost and time intensive
2. Lack of comparability
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Generic (MAU) Instruments
Advantages: 1. Supply weights “off the shelf”
Disadvantages: 1. Insensitive to small changes in
2. Dimensions may not be
3. Weights may not be
transferable across groups
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Some Other Issues
Choosing respondents for utility estimation - whose
What constitutes a „correct‟ health state description?
What is the appropriate „measurement‟ technique?
Aggregation of values?
Biases - ageist, life enhancing versus life-saving etc.
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Decision Rules: CUA
CUA result = CEI (c/e). eg cost per QALY gained
Decision rule = adopt lowest CEI
Application = 1. technical efficiency
2. possibly allocative efficiency within
health care sector
Qst addressed = 1. Should we undertake program “X”
or “Y” to treat condition “Z”?
2. Should we treat condition “A” or “B”?
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Decision Rules: Issues
1. Perspective - Health Care Sector
3. Budget constraint/indivisibility
4. NPV vs BCI
5. Limited nature of economic evaluation
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CUA and Rationing
Market system - price mechanism establishes equilibrium
Non-market system - absence of price as allocative tool
leads to other, non-price, techniques
Issue is one of: (i) philosophical basis for rationing; and (ii)
applied technique for rationing
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Methods of Explicit Rationing
Lay Medical Equity Efficiency
(Coast et al, Priority setting: the health care debate, John Wiley, 1996)
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Explicit Rationing: Technical Methods
Little distinction between setting priorities at
• maximising health gain
• need-based rationing
• age-based rationing
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Technical Method: „QALY League
Economic evaluation produces information on
If using comparable outcomes (eg QALY) can
„rank‟ according to c/e
Can use resultant „league table‟ to allocate
resource to most c/e first
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League Tables: Handle With Care!
Studies show differences in methodology
• choice of discount rate
• method of estimating utility values
• range of costs included
• choice of comparator
Requires consistent methodology, „admission
criteria‟ for inclusion, applicability in local decision
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The Oregon Plan
1987 - decision to stop funding
for organ transplantation
1989 - Oregon Health Services
Commission begins work
1990 - List 1
1991 - List 2
1994 - plan begins
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Oregon List Version 1
1600 condition/treatment pairs
• social values
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Oregon List Version 1
“... looked at the first two pages of that list and threw it in the
“... the presence of numerous flaws, aberrations and errors”
(Harvey Klevit, member, Oregon Health Services Commission)
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Oregon List Version 2
Equal treatment for equal need
709 condition/treatment pairs
• Development & ranking of categories
• Ranking C/T pairs within categories
– Public preferences
• Professional judgement
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Oregon List Version 2
Top Five C/T pairs Bottom Five C/T pairs
1 Pneumonia - medical 705 Aplastic anaemia - medical
2 Tuberculosis - medical 706 Prolapsed urethral mucosa - surgical
3 Peritonitis - medical/surgical 707 Central retinal artery occlusion -
paracentesis of aqueous
4 Foreign body - removal
708 Extremely low birth weight, < 23
5 Appendicitis - surgical weeks - life support
709 Anencephaly - life support
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1. Benefits must be assessed to establish efficiency.
2. Breadth and depth of benefits measured (& valued)
varies across type of economic evaluation.
3. Difference between valuation and measurement.
4. Debate on role of CUA (& CEA) in allocative efficiency
5. Beware „league tables‟!
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