principles of costing for global health
TRANSCRIPT
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PrinciplesofCostingforGlobalHealth
CarolLevin,PhDDepartmentofGlobalHealth
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• Revieweconomicprinciples• Reviewcostconcepts• Overviewofcostingprocessandmethods• Application:HPVvaccination–multi-countrystudy
Overviewoftoday’slecture
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• Cost isageneraltermthatcanrefertothevalueofresources/inputsusedtoproduceagoodorservice.• Thiscanrefertofinancial,economic,unitoraverage,orothertypesofcostsdependingontheingredientsincluded.
Whatisacost?
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I.Conceptsofcost,asusedbyeconomists
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• TotalCost• AverageCost• MarginalCost• Fixedversusvariablecosts• Discountingthefuture• Monetarycostsversusopportunitycosts• IncrementalCost
Basiccostconcepts
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Typicaltotalcostcurves
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Typicalaverage&marginalcostcurves
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• Brooker etal.Costandcost-effectivenessofnationwideschool-basedhelminth controlinUganda• VerticaldewormingprogramthroughMOH• Beganwith5nationalworkshops• Districtlevelworkshopforteachersandcommunitydrugdistributors• Tabletsadministeredinschoolsbyteacherswithsupervision
Example:Deworming,Uganda*
*ExamplecourtesyofSueHorton,UniversityofWaterloo
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• Averagecostperchildwas$0.52,butrangedfrom$0.41to$0.91bydistrict• Drugcostwas40%overall,balancelabor
Example:Costofdeworming
ExamplecourtesyofSueHorton,UniversityofWaterloo
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• Usingschool-baseddewormingexample• Somecostsvaryeveninshort-runwithnumberofchildrentreated• Somecostsdonotvaryinshort-runwithnumbertreated• Inlongrun,somecostswhicharefixedinthelongrunbecomevariable
Fixedvs.VariablecostsI
ExamplecourtesyofSueHorton,UniversityofWaterloo
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• Supposevariablecostis$0.20/child(drugs)• Fixedcostis$1000/district(trainingsession)• District1has5000kids• District2has2000kids
• Averagecostperchildis:• $0.40inDistrict1($0.20plus$1000/5000)• $0.70inDistrict2)0.20plus$1000/2000)
Fixedvs.VariableII
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• Totalcost• District1:$1000+(5000*$0.20)=$2000(fixedplusvariablecosts)• District2:$1000+(2000*$0.20)or$1400(fixedplusvariablecosts)
• Marginalcosts• District1and2are$0.20($0.20moreperchild)
• Unlessrunoutofspaceattrainingsession• Otherfixedcostsincrease—reachinglastmile.
Totalandmarginalcost
ExamplecourtesyofSueHorton,UniversityofWaterloo
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• Conceptof“economiesofscale”• Spreadfixedcostsovermorechildren/patients/outputthenaveragecostsmayfallasscaleincreases• Atacertainpointaveragecostsmayincreaseagain=>“diseconomiesofscale”
Average/marginalcostcurves
ExamplecourtesyofSueHorton,UniversityofWaterloo
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• Inflation• Makesuredollarsareworththesameamountintermsofwhattheycanpurchase
• Discounting• Makesurethatthedollarvalueisexpressedintermsofthemoneythatisneededatthepresenttime,ratherthanthetotalcashflow.• Discountingtakesintoconsiderationtimepreference(nowisbetterthanlater)
• Relatedtorealinterestrate
Multipleyearcostcalculations
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• Economicconceptof“opportunitycost”• “Thereisnosuchthingasafreelunch”- MiltonFriedman• Howmuchwouldtheresourcebeworthinitsnextalternativeuse.• Useittovaluedonatedgoods,volunteerlabororgoodsandservicesforwhichtheremaynotbeamarketprice.
Opportunitycost
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• Incrementalcostsaredifferentthanmarginalcosts.• Weuseincrementalcostsalotinestimatingcostsofglobalhealthprograms.• Whatisthecostofaddinganewserviceortechnologyorinterventiontocurrenthealthservices?• Notwhatisthecostofreachingonemorepersonorproducingonemoreoutput(marginalcost).
Incrementalcosts
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Incrementalvs.MarginalCost