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					                                     Leicester Warwick Medical Schools                             A brief history of rationing in the NHS
                                 Healthcare Evaluation, Provision and Policy   •    Initially assumed that NHS would mop up pool of unmet need and
                                                      Module                        demand would then fall
                                                                               •    No real clue about how much it was all going to cost
Session 5
Resource allocation in healthcare
                                                                               •    Demand has risen every year

 Leicester Warwick Medical School                                                              Early recognition of the need for rationing
                                                                                   We never will have all we need. Expectation will always exceed capacity.
                                                                                    This service must always be changing, growing and improving; It must
                                 Objectives:                                        always appear inadequate. Aneurin Bevan, 1948
•   To introduce the issue of resource allocation in health care
                                                                                                     Mounting pressures on resources
•   Explain the inevitability of rationing in healthcare systems
•   describe briefly approaches to resource allocation that have been used
                                                                               •    Medical innovations such as CT/MRI scanning and new drugs
    in the UK and other countries.                                             •    changing demographic structure
•   explain principles that could be used in making resource allocation        •    Slowdown in economy in 1970s came as a shock
                                                                                                       History of rationing in the NHS
•   describe a range of approaches to resource allocation in healthcare;
•   explain and distinguish between cost effectiveness, cost benefit, cost
                                                                               •    Direct charges to patients (prescriptions, spectacles, dentistry)
                                                                                    introduced for the first time in late 1970s
    utility, and cost minimisation analyses;
•   consider the advantages and disadvantages of using QALYs.
                                                                               •    Waiting lists and non-funding of some services e.g. IVF

                                                                                                     A brief history of implicit rationing
                             Why set priorities?
•   Health care expenditure is rising world-wide
                                                                               •    Doctors make the decisions that result in expenditure

•   No country is keeping up
                                                                               •    Before 1990 reforms, NHS relied mainly on implicit rationing

•   Demography
                                                                               •    Done by clinicians within overall budgetary constraints

•   Technology
                                                                               •    Patients believed care was offered (or withheld) on the basis of clinical
•   Consumerism
•   Need real terms growth of 3-4%
                                                                                                                  Implicit rationing
                                                                                   I would just say to relatives that the patient’s kidneys have failed or are
                                                                                     failing and there is very little that anybody can do about it because of her
                               A few examples
                                                                                     age and general physical state, and that it would be my suggestion or my
•   85 year old patient costs the NHS 15 times the cost of 5-14 year old.            advice that we spare her any further investigation, any further painful
    Numbers will double in 10 years.                                                 procedure, and we would just make her as comfortable as we can for
•   Patient with Haemophilia A and inhibitors cost £140,000 in 48 hours              what remains of her life. (Aaron and Schwarz, 1984)

•   Aglucerase for Gauchers costs £75k per person per year for life
                              Implicit rationing                                                         The New NHS: modern, dependable
•   Led to massive inequities                                                       •   Decision-making process now involves doctors explicitly
•   Open to abuse                                                                   •   More locality-based through PCTs
•   But has its advocates                                                           •   More emphasis on efficiency and evidence

                              Explicit rationing                                                              More national guidance
ADVANTAGES                                                                          •   National Institute for Clinical Excellence
•   Transparent, accountable                                                             – “guidance” on clinical and cost-effectiveness of interventions
•   Opportunity for debate                                                          •   Restricting choice of medicines (eg push for generic prescribing)
•   Use of EBP                                                                      •   Excluding some procedures from NHS
•  More opportunities for equity in decision-making                                 •   More practice protocols/guidelines
•   Very complex                                                                                              NICE Clinical Guidelines
•   Heterogeneity of patients and illnesses                                         •   Non-insulin dependent diabetes
•   Patient and professional hostility                                              •   Early pharmacological management of schizophrenia
•   Threat to clinical freedom                                                      •   Pressure sores
                                                                                    •   Head & Neck Cancer
                                 1990 Reforms                                       •   Haematological malignancies
•   Made rationing more explicit                                                    •   Skin Cancer
•   Health authorities and fund-holders forced to determine priorities              •   Foetal monitoring of CTGs
•   But big problems in identifying criteria to govern decision-making              •   Psychological therapies in Primary Care
•   High profile cases e.g. Child B                                                                           But the pressures grow
                                                                                    •   Increasing problem of new, very expensive drugs that improve HRQoL
                              The child B case                                          eg interferon beta for MS
 Condemned by bank balance
  What state is this country in when a girl’s right to life hinges on the size of                    Rationing is probably inevitable because
  a hospital’s bank balance?                                                        •   More CAN be done eg because of innovation
The Sun, 11.3.1995
                                                                                    •   More people need things to be done (because of ageing, increased
                                                                                        survival after premature birth etc)
  A price too high
 Money is everything in healthcare today. A child’s life is worth only what a       •   Expectations are growing (both professional and public)
  health authority’s accountant is willing to pay for it.                           •   BUT resources are finite
Daily Mirror 11.3.1995
                                                                                                                   Spending on NHS
                                                                                    •   59. 6 BILLION POUNDS in 2001-2002
                                                                                    •   Equivalent to:
•   entire GDP of Greece and Norway                                                 QALYs
•   16 times GDP of Iceland                                                                                Oregon: How to Decide?
                             Size of the health sector                         •    Developed list of about 700 disease/treatment pairs
•   USA (15%) twice as large as UK                                                  •   Intravenous antibiotics for bacterial pneumonia
•   USA system mostly insurance-based                                               •   Surgery for coronary heart disease
•   NHS mostly publicly funded                                                      •   Liver transplant for end-stage cirrhosis
               Ways of making more resources available                              •   etc.
      Improve efficiency of existing services?                                 •    Complex multi-stage process of rank-ordering pairs based on:
•   Technical efficiency – structuring the service so most benefit is
                                                                                    •   Likelihood of benefit
    generated for a given input
•   Allocative efficiency - ensuring that any given intervention goes to the        •   Cost
    people most able to benefit from it                                             •   Frequency of problem

                              Efficiency in the NHS                                 •   Value judgments on resulting quality of life
•   NHS is very efficient.                                                                       Possible criteria for allocating resources
•   Get more for our pound than countries like USA or Germany, due to low      •    equality - everyone gets the same. Not useful as doesn’t address
    costs (e.g. don’t pay doctors and nurses as much; don’t pay much for
                                                                                    different needs
•   USA spends about 14% of its GDP on health care but has an inequitable      •    equity - equal treatment for equal need (need definition of need)
    and inefficient system                                                     •    need - ability to benefit from a health care intervention (difficult to define
                                                                                    and measure)
                     Ways of finding more resources                                Still left with the problem of choosing between different treatments and
•   stop offering services that are of no proven benefit                            different groups of treatments.

•   redeploy monies from other areas of goverment spending. In 1995 UK                              Which services should be rationed?
    came 20 out of 27 OECD countries as percentage of GDP (about 6%)
    spent on health.                                                           •    Prioritising across services: oncology vs cardiology?
•   Raise taxes or introduce more charges (currently account for 2% of         •    Priortising within services: varicose veins vs cleft palates?
    NHS funding).                                                              •    Which services should be part of the package of care?
                             Approaches to rationing                           •    On what basis should the package of care be chosen?
•   Exclude some treatments/services altogether e.g. IVF
                                                                                                  Which patients should receive priority?
•   Exclude some types of patients altogether e.g. babies of very low
    birthweight                                                                •    Within treatments: those who have waited longest or those with greatest
•   Exclude certain patients from some types of treatment e.g. no varicose          clinical needs?
    vein operations for over 65s (allocative efficiency)                       •    Between patients: who should get cancer treatment: woman aged 62 or
                                                                                    girl aged 12?
• Only fund treatments that offer maximum benefit - e.g. measured by
                     Doctors shouldn’t have to do this!                                                  Cost minimisation analysis
•    The policy issue is not WHETHER to ration but HOW                           •   Tries to evaluate the costs of alternative therapies which generate
•    The individual (Hippocratic) ethic versus the social (opportunity cost)         exactly the same clinical outcomes
     ethic: doing good to the patient in your care versus recognising the need   •  You choose the intervention based on which is cheapest
     to target heath care to those patients who can benefit most per unit of     e.g. different types of hip prosthesis may all result in the same QoL for
     expenditure                                                                    patients so you choose the cheapest one.

                             Healthcare economics                                                              Example of CMA
•    Economics - supply and demand for goods and services                        •   •Comparison of day surgery with traditional in-patient treatment for
                                                                                     hernias and haemorrhoids.
•    Health services not like other commodities
•    Equity of access is of more concern
                                                                                 •   •The outcome of interest - successful operations - is the same in both
•    Market forces alone cannot guarantee optimal distribution of health
                                                                                 • •Therefore, only interested in the different costs associated with each
                                                                                 Russell et al. Lancet 1977
                             Economic evaluation
•    Decisions about health care often entail making trade-offs between the                                  Cost effectiveness
     estimated benefits and the estimated harms and costs of the
                                                                                 •   How much it costs to get an effect

•    Economic evaluation is used to describe a range of techniques that may
                                                                                 •   e.g. how much per hospital admission prevented by home nebulisers?
     be used to assemble evidence on the expected costs and benefits of          •   i.e the RATIO of COSTS to EFFECTS
     different programmes.                                                       •   How might different cost effectiveness ratios for alternative treatments
                        Costs- the economist’s view
•    Use of resources for a given form of health care inevitably involves a                              Cost effectiveness analysis
     sacrifice: the health care system forgoes the opportunity to use the same   •   Used when the outcomes vary but can still be expressed in common
     resources in other beneficial activities.                                       units. Different procedures can be expressed in terms of cost per unit of
•    The economist measures cost in terms of the benefit that would be               outcome.
     derived from using resources in their best alternative use.                 •   eg: a range of treatments for hypertension. Effectiveness varies, but can
                                                                                     all be expressed in terms of reduction is diastolic blood pressure
                      Methods of economic evaluation                                 achieved. You could look at cost per reduction of 5 mm Hg.
•    Cost minimisation analysis                                                  •   Measures often used include “lives saved” or “life years gained” or “pain
•    Cost effectiveness analysis                                                     free days”
•    Cost benefit analysis                                                       •   Screening programmes often use “case detected”
•     Cost utility analysis                                                      •   Patient satisfaction is also sometimes used as measure
    Try to help you chose what to spend your money on
                                                                                                               Example of CEA
                                                                                 Comparison of the cost effectiveness of metallic stents with plastic
                                                                                 endoprostheses in palliation of oesophageal cancer.
                                                                                 Metallic stents may lead to increased survival - based CEA on that.
                                                                                                                                      O’Donnell et al, 2000.
                                Cost-benefit analysis
•     Cost benefit analysis seeks to place a monetary valuation on both the                                    QALY approach assumes that:
      costs and the benefits of alternative treatments to determine the net            •     1 year in perfect health
      benefit.                                                                             is the same as
    Trying to place monetary values on benefits is not easy. Most common
      approach is “willingness to pay”.                                                     10 years with a quality of life 0.10 of perfect health

•    One way of putting monetary value on benefits is to use individuals’                                Example: man is diagnosed with cancer.
    Preferences are based on willingness to pay; the value people attach to            •    Told he has 1 year to live if he does not have treatment.
     healthcare outcomes is established by asking them how much they                   •    His quality of life, without treatment, will be 0.8 of perfect health and he
     would be prepared to pay to obtain the benefits or avoid the costs of                  will then die quickly.
•    e.g. how much would you be willing to pay to remain fully mobile?
                                                                                       •    Without treatment = 0.8 QALYs

                                                                                                          Example: man is diagnosed with cancer
                                Cost utility analysis
•    Avoids expressing benefits in monetary terms but relies on subjective
                                                                                       •    If he receives treatment he will live for 4 years, but his QoL will be 0.2 of
                                                                                            perfect health.
     assessment of the well-being gained from alternative interventions
•    QALYs is the most common form of cost-utility analysis
                                                                                       •    With treatment = 0.8 QALYs
                                                                                       •     no point in treating this man.
                                Utilities and QALYs
•    Utility is a measure of preference about an outcome (a health state),                            Example: use of QALYs in cost utility analysis
     giving an indication of the relative value placed on the health state             •    Female diagnosed at age 54 with peptic ulcer can expect to live 23
     •   Scaled 0 (death) to 1 (full health)                                                years.
•    Utilities are used to “weight” time according to quality of life spent during     •    QoL without treatment is 0.7 of perfect health.
     that time
                                                                                       •     expects to have 16.1 QALYs without treatment
     •   A health state with a utility of 0.5 lasting two years is equivalent to one
         year in full health                                                                                               Example:
•    Allows us to consider differences in treatments which involve changes in          •    QoL with treatment A (ranitidine) is 0.95 of perfect health, at cost of £50
     quality as well as quantity of life                                                    per annum.

                           Health interventions may:
                                                                                       •     expects to have 21.85 QALYs on A

•    extend life (gain life years)
                                                                                       •    QALYs gained = 21.85-16.1 = 5.75
                                                                                       •    Total cost of treatment = 23 X50 = £1,150
•     improve quality of life
                                                                                       •    QALYs gained = 21.85-16.1 = 5.75
                           Quality Adjusted Life Years                                 •    Total cost of treatment = 23 X50 = £1,150
•    QALYs adjust life expectancy for quality of life.                                 •    Cost per QALY gained = £200

•    Try to combine quality and quantity of life into a single index.
•    1 year of perfect health = 1 Quality Adjusted Life Year
                                    Example:                                   •   Don’t distinguish between interventions that are life-enhancing vs
•   QoL with treatment B (gaviscon) is 0.80 at cost of £30 per annum.              life-saving
•    expects to have 18.4 QALYs on B                                          •   Technical problems with their calculations
•       QALYs gained = 18.4-16.1 = 2.3                                         •   QALYs may not embrace all dimensions of benefit; Values expressed
•       Total cost of treatment = 23 X30 = £690                                    by experimental subjects may not be representative
•       Cost per QALY gained = £300                                                            Problems with QALY league tables
•   More expensive treatment therefore more efficient                      •   May not be an acceptable form of rationing
                       Use of qalys in priority setting                    •   Evidence on costs is not good

•   Requires information on qalys for different procedures plus costs of
                                                                           •   Assume that everyone perceives value of health in the same way
    these procedures
                                                                                   Conclusions: Rationing is not easy but it’s got to be done
•   These can then be ranked into a QALY league table                      •   Until recently it has been largely implicit and done by individual clinicians

                              QALY league table
                                                                           •   Now it is becoming explicit but there are difficulties in identifying
                                                                               principles that should govern decision-making
                                        Present value of
                                        extra cost per                     •   QALYs offer a way of rationing but are very problematic
                                        QALY gained (£)
•   Cholesterol advice and diet therapy            220
•   Hip replacement                                1,180
•   Kidney transplantation (cadaver)               4,710
•   Breast cancer screening                        5,780
•   Neurosurgery for malignant brain tumours       107,780

                Using qaly league tables in priority setting
•   An explicit, not implicit form of rationing.
•   Does acknowledge population needs.
•   Allows explicit comparisons between interventions.
•   Allows prioritisation of interventions.
•   May be useful at individual patient level.

                     Problems with QALY league tables
•   Do not distribute resources according to need, but according to the
    benefits gained per unit of cost.
    •   Discriminate against elderly
    •   Discriminate against the already disadvantaged
    •   More appropriate for acute than chronic conditions

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