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
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
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
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
The cheerful face?
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
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
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
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
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
Plumbing
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Efficiency and equity
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
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
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
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
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
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
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
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
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.