Health Economics - Case Study Example

Background Health Economics (HE) is a branch of Economics that deals with the allocation of scarce health and healthcare among unlimited demands. Primarily HE tackles major issues and concerns that affect the distribution of health care (Williams, 1987 pp. 10-32). Like other branches of economics, there are certain subdivisions that specifically discuss various subjects related to Health Economics. These distinct topics include: influences to health; health and its value; demand for health care; supply of health care; microeconomic evaluation and treatment level; market equilibrium, system level evaluation; planning, monitoring, and budgeting mechanisms. The value of Health Economics is indispensable in a society. Its scarcity is a primary concern especially among countries without ample resources to provide healthcare (Culyer, 1989). Another major issue that makes Health Economics important is the mode of distribution. There have been situations showing lack of logistic strategies that effectively deliver health to major recipients. Finally, the sustenance of supply and allocation of health care makes Health Economics valuable. In ensuring both the necessities are satisfied, costs have to be incurred consistently. It is the spending capacity of countries that decide supply and distribution of healthcare. The Cost of Health Economics According to Fuchs (1996, pp.1-24), the level of expenditures incurred by governments in healthcare delivery has increased precipitously. The sudden rise in cost can be attributed to intellectual advances, greater availability of information, and the ever-increasing demand for such service. The dedication of government spending to health care services results to various economic sacrifices. Aside from health, there are pressing needs that the society needs to acquire. Concentration in healthcare looms problems such as forging quality education and the generation of sustainable income through investments and government spending. Direct costs of delivering healthcare involve purchase of medicines, establishments of medical institutions, and hiring of personnel knowledgeable of health services. Other costs also include research and development, which at present is the most critical item being propagated by governments. Moreover, the government needs to incur indirect costs such as building of infrastructures to ensure that transportation and communication improves healthcare delivery. Furthermore, the marginal cost of health care needs to be evaluated. Unlike the total cost, which is simply an aggregate, marginal cost accounts the movement in the cost. It is more important to monitor the effect of population increase in total healthcare than measuring the total cost alone. Four Techniques of Health Economics Health Economics can be approached scientifically using tools and mechanisms. Analytic evaluation of cost management in Health Economics serves as the primary point of these discussions. First, the cost-minimisation analysis (CMA) economic compares a particular health care product or service. The goal of the method is to find the least costly option among a pool of choices (Donaldson and Shackley, 1997). It has to be noted that the alternative chosen needs to demonstrate an effect that is substantially similar to the other choices provided. There are several conditions in this analysis that have to be verified before arriving as conclusive findings. The initial comparison will use price as the gauge. Indeed, it is easy to identify which among the alternatives is the most economic. Another important consideration in this analysis is the negative effects provided by a medicines being compared. It is important to emphasize on the level of toxicity and the option being considered needs to be as low-risk as the other medicines. Lastly, the effectiveness of the medicine being prioritised has to within the level of the other medicine it is being compared with. Cost-benefit analysis (CBA) necessitates programme results to be valued monetarily (Nas, 1996). This allows analysts the incremental cost including the incremental units as health programmes are being implemented. CBA compares the discounted future inflow of aggregate programme benefits with incremental programme losses. Basically, the goal of the analysis is to determine the excess of benefits when equated with the losses. Positive net return means that benefits exceeded the cost and the programme is described as worthwhile. CBA has always been a primary tool used by governments in evaluating projects and programmes. Usually, the costs and benefits of a particular health programme will cause several interventions in the public (Harington and Portney, 1987, pp. 101-112). The process includes monetary amounts of the incurred costs and the expected return. Aside from the realisable benefits, intangible gains can also be included. CBA aims to set both costs and benefits on a common temporal position. Discounts are also included to ensure that the benefits will be treated using their present value. Cost-effectiveness analysis (CEA) is commonly used when the range of options is limited. The assumption, however, considers a fixed amount of budget and timeframe given to the decision-maker. In most instances, CEA considers the monetary value of the programme. Measurement of monetary value pertains to the determination of the required budget for the programme. The most important aspect for CEA in making comparisons is the results (Neumann, 2005). Since CEA measures effectiveness, goals will be established and subsequently targeted. Logically, the programme that has reached the goals will be highly considered. It is expected that the programme with the highest effectiveness and lowest cost will be selected. One of the main concerns by analysts using CEA is the veracity of data being used (Drummond, et al., 2006, pp.103-105). The most credible information that can be analysed using CEA is based from previous studies made. These literatures are considered as the most reliable sources for CEA. Aside from the goals, which were discussed previously, there are also criteria being set to serve as the parameters for the comparison. It is critical for both compared programmes to be established on two equal and unbiased platforms. The final technique used in Health Economics is the Cost-Utility Analysis (CUA). Medical institutions have long histories of using CUA as guide for procurement decisions. CUA specifically focuses on the outcomes of health programmes are either generated or forgone (Gerard, 1992, pp. 249-279). In CUA, the incremental gains of the programme based on a perspective are compared with the incremental health enhancement attributable to the programme. The health improvement is measured using the quality-adjusted life-years (QALY). The results of the analysis is presented as cost per QALY gained. CUA was created to specifically address the shortcoming observed from the use of CEA. The method allows broad range of substantial results to be included through creation of methods that create results that will be eventually consolidated to form one solid result. In addition, CUA allows the analysts to determine the quantity of life and the quality of life (Luce and Elixhauser, 1990). Moreover, the broadness of CUA is terms of usability are highly advantageous for decision-makers. Evidently, health programmes are dynamic and changes pace through time. CUA is being preferred by analysts because the techniques addresses all important issues and takes into account the less noticeable aspects that can become major obstacles in the future. Comparative Analysis There are various similiraties and differences concerning the different methods used in economic evaluation. The common among the four methods is the manner in which cost is valuated. All four techniques consider costs monetarily using quantifiable units. Another major similarity is the process in which the evaluation is implemented. The four techniques depend on meticulous comparisons before the results are obtained. In most instances, the comparison involves several alternatives. It is also possible that the proposed programmes are compared with another programme that is being implemented in a particular location. Although the general process in similar, the four techniques use specific derivations and base their results on different criteria. For instances, CMA is more concerned with the alternative that incurs the lowest cost assuming that the programme is in the same level as the other options. In addition, it is only CMA that deviates from identifying consequences of the programme. On the other hand, CEA focuses on the single effect that is common to the programmes being compared. The most important part of the process is the determination of levels in which the effect was achieved. Definitely, CEM will highlight the programme that has the higher degree of effect. CBA, however, is concerned with multiple effects exhibited by the programmes. The most important condition in this process is that the effects have to be common to the alternatives. At least each option will show a tendency, regardless of the degree, of being similar in terms of outcomes. As expected, analysts will pick the programme that consistently provides the highest degree of effects on all the effects observed. Finally, CUA is performed in a similar fashion as CBA with only a few changes. CUA also considers multiples effects being obtained from the alternatives. The method, in contrast to CBA can analyse uncommon effects. This appears to be complex, but CUA sets parameters to translate the various effects to comprehensible results. CMA is only effective in programmes that greatly address costs. The method is described as an incomplete appraisal because of its failure to fully picture the capacity of the programme. Unless the programmes can show innate similarity in outcomes, then CMA can be used as a method for evaluation. The most important advantage of this method is that complexities are being eliminated. Since the observed programmes tend to provide uniform effects, then using the price as gauge for decision-making appears to be a logical decision. The use of CEA has been consistently observed in most economic evaluation of heath programmes. Essentially, CEA centres in the most realistic effects that the programmes provide. It is indeed easier to classify a project as better when tangible results are being reflected. CEA can be effectively used for programmes that need clear outcomes. For example, CEA can show to the policy makers the number of years gained by patients from a particular programme. The most common basis used in CEA is the successful diagnoses made out of the health project. Governments are accustomed to use CBA as its form of economic evaluation. This method is the most widely used because it equates costs with benefits in monetary methods. Health programmes are most often considered as investments. Because of this perception, it is only proper to determine the capacity of such investment to provide ample returns. Basically, CBA can be an effective method when used in assessing programmes with long-term implementation schemes. The only problem with CBA is that it uses the present values of the benefits. This means that discounts are set and this process can be subjective. CUA is considered as the most preferred method for evaluation. It is a combination of monetary values and other perspectives seen in the programmes. CUA is valuable because it uses criteria that generally describe the impact of the options. It is observed as CUA is effectively used in programmes that provide useful health treatments and extend life. In addition, the method is also efficient in measuring programmes that takes into consideration side effects of medical treatments. Related Studies Arrow (2000, pp 85-91) conducted a study using CMA in evaluating two programmes that are concerned with dental health. The study focused on the use of fissure sealants to prevent dental caries. After the tests, it was found out that a difference of $40 per respondent was spent for such procedure. It was suggested that longer period of observations have to be made to see the effects on the cost. Another study initiated by Tucker et al. (1998) used CEM to evaluate the immunisation programme being used in the US. The study disclosed that the programme was cost-effective in comparison to the actual healthcare system. A study by Nichol (2001, pp. 749-759) evaluated the programme on influenza vaccination using CBA. Based on the results, vaccination for adults against influenza is cost saving. Almost $14 was saved on each respondent that underwent the vaccination. Lastly, Valenstein et al. (2001, pp. 345-360) used CUA of screening for depression in primary care. The results show that annual screening cost more than $50 QALY while the one-time screening was cost-effective. Sensitivity Analysis The conducted of sensitivity analysis in this discussion is important as the earlier sections. The process allows all the techniques to be apportioned in a manner that can either be quantitative or qualitative. In doing sensitivity analysis, the discussion attempts to show the resemblance among the four techniques. The analysis determines the exact definition of the methods. In addition, the analysis allows aspects that cause variability to be discovered. Sensitivity analysis is critical because the mentioned techniques are created out of economic models and policy-based theories (Saltelli et al, 2004). In addition, there are risks involved especially in the weighing of costs to the benefits provided by the alternatives identified. Conclusion The role of Health Economics in a society is critical. Indeed, the health condition in particular community sums up the efforts being initiated by the government to deliver healthcare. Since the government has several programmes, it is only logical to make an evaluation before implementation. Each of the four techniques provides advantages and drawbacks. But the most important part of the process includes sensitivity analysis to define the evaluation method to be used and in effect determine the best alternative. References Arrow, P. (2000). Community Dental Health. “Cost minimisation of two occlusal caries preventive programmes,” pp. 85-91. Culyer, A.J. (1989). Compendium of English Language Course Syllabi of Textbooks in Health Economics. “A glossary of common terms encountered in health economics. Donaldson, C. and Shackley, P. (1987). Oxford Textbook for Public Health. “Economic evaluation.” Oxford: Oxford University Press, pp. 949-971. Drummond, M.F. et al. (2006). Studies in Economic Appraisal in Health Care. Oxford: Oxford University Press, pp. 103-105. Fuchs, V. (1996). The American Economic Review. “Economics, values, and health reform.” Pages 1-24. Gerard, K. (1992). Cost Effectiveness in Health and Medicine. Oxford: Oxford University Press, pp. 249-279. Harrington, W. and Portney, P. (1987). Journal of Urban Economics. “Valuing the benefits of health and safety regulations,” pp. 101-112. Luce, B. and Elixhauser, A. (1990). Standards in Socioeconomic Evaluation of Healthcare Products and Services. Berlin: Springer. Nas, T.F. (1996). Cost-Benefits Analysis: Theory and Application. Thousand Oaks, California: Sage Publications. Neumann, P.J. (2005). Using Cost-effective analysis in Health Care. Oxford: Oxford University Press. Nichol, K. (2001). Arch Internal Medicine. “Cost-benefit analysis of a strategy to vaccinate healthy working adults against influenza,” pp. 749-759. Saltelli, A. (2004). Sensitivity Analysis in Practice. A Guide to Assessing Scientific Models. New York: John Wiley and Sons. Tucker, A.W. et al. (1998). JAMA. “Cost-effectiveness analysis of a rotavirus immunization program for the United States,” pp. 1371-1376. Valenstein, M. et al. (2001). The Cost Utility of Screening for Depression in Primary Care. pp. 345-360. Williams, A. (1987). Health and Economics. “Health and Economics: The cheerful face of dismal Science.” London: McMillan. Read More