an introduction to health economics: the cheerful face of the dismal science?

Health economics

Chris Sampson

Introduction

Why we’redifferent

What we do

A: What influenceshealth?

B: What is health?

C: Demand for healthcare

D: Supply of healthcare

E: Micro-economicevaluation oftreatment level

F: Market equilibrium

G: Evaluation atwhole system level

H: Planning,budgeting andmonitoringmechanisms

The cheerful face

Supply and demand

Costs and benefits

Life and death

Efficiency and equity

Conclusions

References

“Health economics: the cheerful face of thedismal science?”[1]

Chris Sampson

University of Nottingham

21st October 2014

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Introduction

Objectives

I Introduce the topic

I Outline what health economists do

I Make a case for engaging with the subject

Things to bear in mind

1. Do not be afraid of econospeak

2. Focus on empirical work

3. All examples are from 2014

4. Not comprehensive

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

The cheerful face?

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

The cheerful face?

Alan Williams

“The word we use normally to describe people who behavewithout regard to the costs of their actions is not ‘ethical’but ‘fanatical’ ”

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

A special case?

The birth of health economics

I “some characteristics of medical care which distinguishit from the usual commodity of economic textbooks...establish a special place for medical care in economicanalysis”[2]

I Demand = irregular and unpredictableI UncertaintyI Asymmetry of informationI Principal-agent relationship with physicianI Barriers to entry

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Plumbing

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

What influences health?

Scope

I Epidemiology

I Behaviour

I Education

I Income

Example

‘Going the same ‘weigh’: spousal correlations in obesity inthe United Kingdom’[3]

I Method: Seemingly unrelated regression / randomeffects models

I Result: Evidence of matching in the marriage ‘market’

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

What is health?

Scope

I Value of life

I Preferences

I Attributes of health

Example

‘The value of a QALY: individual willingness to pay forhealth gains under risk’[4]

I Method: Willingness to pay study

I Result: AC80,000–110,000 per QALY

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Demand for health care

Scope

I Willingness to pay

I Need

I Barriers to care

I Agency relationship

Example

‘A prescription for unemployment? Recessions and thedemand for mental health drugs’[5]

I Method: Time-series regressions

I Result: 1% ↓ employment ⇒ 10% ↑ prescriptions

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Supply of health care

Scope

I Costs of care

I Productivity

I Input substitution

I Remuneration systems

Example

‘The tougher the better: an economic analysis of increasedpayment thresholds on the performance of generalpractices’[6]

I Method: Difference-in-differences

I Result: Increase in thresholds ⇒ 1.77% ↑ GPperformance

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Micro-economic evaluation of treatment level

Scope

I Cost-effectiveness analysis

I Decision modelling

Example

‘Should colorectal cancer screening be considered in elderlyperson without previous screening? A cost-effectivenessanalysis’[7]

I Method: Microsimulation

I Result: Yes

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Market equilibrium

Scope

I Prices

I Rationing

Example

‘Regulation of pharmaceutical prices: evidence from areference price reform in Denmark’[8]

I Method: Poisson pseudo-maximum-likelihoodestimation

I Result: Prices ↓ and substitution away from brandeddrugs

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Evaluation at whole system level

Scope

I Equity

I Efficiency

I Performance comparison

Example

‘Valuing QALYs at the end of life’[9]

I Method: Surveys

I Result: QALYs from end of life treatments have ahigher social value

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Planning, budgeting and monitoring mechanisms

Scope

I Regulations

I Management structures

Example

‘Health spending slowdown is mostly due to economicfactors, not structural change in the health care sector’[10]

I Method: Linear regression models

I Result: 70% of the slowdown due to economic factors

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

The cheerful face

A different approach

I Supply and demand

I Costs and benefits

I Life and death

I Efficiency and equity

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Supply and demand

Profit maximisation?

I NHS (et al)

I Not-for-profit private providers

Need

I Do people ever want to visit the doctor?

I Capacity to benefit

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Costs and benefits

Opportunity cost

I Health forgone

I Next best treatment

Health for the sake of health

I Non-utility information

I Extra-welfarism

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Life and death

QALYs

I Quality and quantity of life

I Generic outcome

The worst possible outcome?

I States worse than death

I A good death?

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References


Cost-effectiveness

I Cost-per-QALY

I Willingness to pay thresholds

A QALY is a QALY?

I Fair innings

I Terminal illness

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Conclusions

In summary...

Health economics has developed as a subject beyond simplythe economics of health care. One of it’s key strengths is itsmultidisciplinary approach.

The impact of health economics

I Policy impact

I NICE

I Funding

Think like an (health) economist

I What’s the (health) opportunity cost of that?

I A decision to do nothing is still a decision

I “Be reasonable – do it my way”

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

Further reading

To satisfy a casual interest:

I The Academic Health Economists’ Blog (UK)

I The Incidental Economist (US)

For some learning:

I ‘Economic Analysis in Health Care’[11]

I ‘Methods for the Economic Evaluation of Health CareProgrammes’[12]

Follow-up

I Email me at: [email protected]

I Get these slides at: chrissampson.me

http://aheblog.com

http://theincidentaleconomist.com

mailto:[email protected]

http://chrissampson.me

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

References I

Alan Williams.

Health economics: the cheerful face of dismal science.In Alan Williams, editor, Health and Economics: Proceedings of Section F (Economics) of theBritish Association for the Advancement of Science, Bristol, 1986, pages 1–11. The MacmillanPress Ltd, London, 1987.

Kenneth J Arrow.

Uncertainty and the welfare economics of medical care.The American economic review, 53(5):941–973, 1 December 1963.

Heather Brown, Arne Risa Hole, and Jennifer Roberts.

Going the same ‘weigh’: spousal correlations in obesity in the united kingdom.Applied economics, 46(2):153–166, 2014.

Ana Bobinac, Job van Exel, Frans F H Rutten, and Werner B F Brouwer.

The value of a QALY: Individual willingness to pay for health gains under risk.PharmacoEconomics, 32(1):75–86, January 2014.

W David Bradford and William D Lastrapes.

A prescription for unemployment? recessions and the demand for mental health drugs.Health economics, 23(11):1301–1325, November 2014.

Yan Feng, Ada Ma, Shelley Farrar, and Matt Sutton.

The tougher the better: An economic analysis of increased payment thresholds on theperformance of general practices.Health economics, 5 January 2014.

Health economics

Chris Sampson

Introduction


What we do


B: What is health?







The cheerful face

Supply and demand

Costs and benefits

Life and death


Conclusions

References

References II

Frank van Hees, J Dik F Habbema, Reinier G Meester, Iris Lansdorp-Vogelaar, Marjolein van

Ballegooijen, and Ann G Zauber.Should colorectal cancer screening be considered in elderly persons without previous screening?:A Cost-Effectiveness analysis.Annals of internal medicine, 160(11):750–759, June 2014.

Ulrich Kaiser, Susan J Mendez, Thomas Rønde, and Hannes Ullrich.

Regulation of pharmaceutical prices: evidence from a reference price reform in denmark.Journal of health economics, 36:174–187, July 2014.

Jose-Luis Pinto-Prades, Fernando-Ignacio Sanchez-Martınez, Belen Corbacho, and Rachel Baker.

Valuing qalys at the end of life.Social science & medicine, 113:5–14, May 2014.

David Dranove, Craig Garthwaite, and Christopher Ody.

Health spending slowdown is mostly due to economic factors, not structural change in the healthcare sector.Health affairs, 33(8):1399–1406, 1 August 2014.

Stephen Morris, Nancy J Devlin, and David Parkin.

Economic Analysis in Health Care.John Wiley & Sons, 2007.

Michael F Drummond, Mark J Sculpher, George W Torrance, Bernie J O’Brien, and Greg L

Stoddart.Methods for the Economic Evaluation of Health Care Programmes.Oxford University Press, USA, 2005.

an introduction to health economics: the cheerful face of the dismal science?

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