A Health Economics Framework for the Management of Diabetes - Coursework Example

A Health Economics Framework for the Management of Diabetes Introduction Diabetes is one of the most widespread chronic illnesses throughout the world, and is considered by many health experts and policy makers to have already reached epidemic proportions; if unchecked, it is estimated that 1 in 14 adults worldwide – about 380 million people – will be suffering from diabetes by 2025 (Pieris-Caldwell, Templeton, Ryan, & Moon, 2008, 2). The most prevalent and fastest-growing of the three types of diabetes, Type 2, is largely preventable, and thus has become the focus of research and clinical efforts to combat the disease. In this report, the nature and extent of diabetes in Australia is examined, with particular attention paid to the financial and human costs the disease carries with it, and the potential future impact of diabetes on people and the health system. Recommendations for health managers based on alternative approaches to health economics are presented to suggest ways in which future resources could be allocated to effectively manage and reduce diabetes incidence in Australia. Background: What is Diabetes? Diabetes is a chronic health condition marked by an excess of glucose in the blood, caused by the body’s inability to produce insulin, or to produce sufficient amounts of insulin, which is a hormone created in the pancreas controlling the amount of glucose in the body (Moon, 2010, 151). There are three types of diabetes. Type 1 diabetes is an auto-immune condition in which the hormone-producing cells, called β cells, do not function and stop producing insulin; the factors which cause Type 1 diabetes are thought to be largely genetic, and there is no known prevention of the disease (Moon, 2010, 152; Silink, 2002, 1). Gestational diabetes is generally a short-lived condition that affects pregnant women; it usually passes after the birth of the baby, but can increase the risk of suffering gestational diabetes in later pregnancies or suffering Type 2 diabetes in later life (Moon, 2010, 152). Type 2 diabetes is the far more common form of the disease, accounting for 85% to 90% of all diabetes (Colagiuri, Colagiuri, Yach, & Pramming, 2006, 1562; Moon, 2010, 152). In Type 2 diabetes, the β cells are progressively damaged, producing gradually less insulin as time passes (Silink, 2002, 1). Type 2 diabetes is the focus of this report, because it is the most common form of this disease and is about 90% preventable. It can occur at any age, although it is more common in people over 50 years old (Armstrong, Gillespie, Leeder, Rubin, & Russell, 2007, 485). Type 2 diabetes is linked to a number of risk factors, including family history of diabetes, older age, ethnicity, obesity and physical inactivity (Parsons, Wilson, & Scardigno, 2000, 9-10). In Australia, people of Southern Asian, Middle Eastern, Polynesian, or Aboriginal and Torres Strait Islander ethnic backgrounds are at a somewhat higher risk of contracting Type 2 diabetes (Moon, 2010, 152). Obviously, risk factors such as ethnic background, age, or family history of diabetes are beyond anyone’s ability to control, but the main risk factors – poor diet, obesity, and the lack of activity – can be managed. In recent years, these factors have been cited by numerous researchers as the prime culprits in the increase in diabetes among juveniles, presumably the more preventable Type 2 form of the disease (Colagiuri, Colagiuri, Yach, & Pramming, 2006, 1562). Obesity is particularly worrisome, because the clear trend in recent years is a steady increase in obese and overweight people in the Australian population, and is expected to continue to increase as this graphic from the Australian Department of Health and Ageing shows: Fig. 1: Obesity Trend in Australia (Source: Australian Dept. of Health & Ageing) Impact of Diabetes and Implications of Diabetes for the Future Prevalence of Diabetes in Australia The prevalence of diabetes in Australia is similar to the worldwide trend, in that it is noticeably increasing over time. A clear estimate of the incidence of new cases of Type 2 diabetes and consequently, at what rate the prevalence of the disease is increasing, is difficult to obtain because the disease has no clear beginning in sufferers and is often un-diagnosed (Moon, 2010, 152). People suffering from Type 2 diabetes may have the disease for a period of time before they become aware of it, since its onset is gradual. Other estimates of diabetes incidence, however, can give some indication to the prevalence of Type 2 diabetes. In 2001, the prevalence of all types of diabetes in Australia was about 7.4% of the population, with men being affected more than women (8.0% of men versus 6.8% of women); this represented a prevalence of diabetes twice that of 20 years earlier (Cameron, et al., 2003, 427; Dunstan, et al., 2002, 829). Worldwide, the increase in the number of diabetic cases in studies over the last 10 to 15 years was estimated at somewhere between 2.8% and 3.0%, with most researchers agreeing the rate would increase, to perhaps as high as 4% or more per year by 2030 (Nolte, Bain, & McKee, 2006, 1007; Onkamo, Väänänen, Karvonen, & Tuomilehto, 1999, 1395). Recent data indicates the problem is slightly worse in Australia than the findings in the above studies; in 2007-2008, more than 818,000 Australians were diagnosed with diabetes, an age-adjusted rate of 3.8% of the population, 0.5% higher than the rate just three years earlier. Of these diabetes cases, about 88%, or about 3.4% of the population, were Type 2 diabetes, and 10% were Type 1, with about 2% of the patients being unsure of which type they were suffering from (gestational diabetes was ignored in the survey) (Moon, 2010, 154). Fig. 2: Increasing rate of diabetes prevalence in Australia (Source: Australia’s Health 2010 [Moon, 2010, 155]) Based on Australia’s population of approximately 22.5 million, this gives an overall diabetes prevalence of about 8.55 per 100,000 population, and a prevalence of Type 2 diabetes of about 7.52 per 100,000 population. Costs of Diabetes In 2007, diabetes-related health care is estimated to have cost Australia over $3 billion, accounting for more than three million consultations with doctors and more than 65,000 hospitalisations annually; the average individual cost per diabetic patient was estimated to be $7,566, with direct health care costs accounting for about $5,325 of that amount (Armstrong, Gillespie, Leeder, Rubin, & Russell, 2007, 485). However, without an explanation what there figures represent and how they are calculated, they are meaningless. Costs attributable to diabetes – or any other medical condition for that matter – are usually considered in the context of direct costs, indirect costs, and intangible costs. Direct costs are the most obvious; these are the costs of direct medical care such as doctors’ consultations or hospitalisations, and medication. Indirect costs are those that could be described as ‘lost productivity’ – people who are unable to work or otherwise be economically productive because they are limited by their health conditions, or die from them. Indirect costs could also include lifestyle changes required to manage the disease, such as relocating ones’ place of residence closer to a medical clinic, or making significant dietary or other personal changes (Gray, 1994, v). Intangible costs are harder to calculate, but are no less significant; these are reduced life expectancy and lowered quality of life (Bradley, 2001, 7; Jönsson, 1998, C8). Intangible costs of chronic medical conditions such as diabetes are measured by a factor termed a DALY, which stands for disability-adjusted life year. The DALY is calculated by measuring years of life lost (YLL) due to a chronic illness and its effects, and measuring years of ‘healthy’ life lost (YLD); the higher the number of DALYs (YLL + YLD), the higher the ‘burden’ of the disease in terms of its intangible costs (Jönsson, 1998, C8; Pieris-Caldwell, et al., 2008, 83). As a practical example, one DALY represents one year less of a person’s life expectancy if he or she did not have diabetes; in other words, a person who might be expected to live to age 80 if healthy but who dies at age 63 from complications due to diabetes has “lost” 17 DALYs.In 2003, diabetes accounted for 143,831 DALYs in Australia due to the disease itself or its complications imposed on individuals such as neuropathy, peripheral vascular disease, and amputation, accounting for 5.5% of the total for all health conditions in Australia; nearly 75,000 more DALYs could be attributed to ischemic heart disease or stroke related to diabetes, making diabetes accountable for 8.3% of Australia’s ‘lost years’ due to premature death or reduced quality of life (Pieris-Caldwell, et al., 2008, 83). Diabetes is the eighth-leading cause of death for Australians, accounting for 2.7% of deaths among men and 2.8% of deaths among women in 2007 (Dixon, 2010, 50). On the positive side, even though the prevalence of diabetes is increasing in Australia, premature deaths from all preventable causes – which would include most cases of Type 2 diabetes – have been decreasing significantly over a long period of time; for example, preventable deaths declined by more than 15% for women and more than 20% for men between 1997 and 2003 (Nolte & McKee, 2008, 63-64). In terms of actual financial costs, in 2004-2005 total health care expenditure accountable to diabetes was $989 million; about 84% (approximately $830.76 million) of those costs were for Type 2 diabetes-related expenditures, with Type 1 diabetes accounting for 14% and the remainder being spent on diabetes prevention (Pieris-Caldwell, et al., 2008, 84). The $989 million total represented about 1.22% of the $81.06 billion total health care expenditure in 2004-2005 in Australia (Braddock, 2010, 409). That figure, however, contrasts sharply with a more recent study that puts the overall proportion of expenditure for diabetes at around 9% of total health expenditure in 2010 (Zhang, et al., 2010, 296). Future Trends According to the graph in Figure 1, the rate of diabetes prevalence in Australia is increasing at about 0.14% per year (Moon, 2010, 155). The increase is not uniform in reality, but if that average holds over a long period of time, the trend from 2008, when the prevalence was 3.8% of the population, or 8.55 per 100,000 people, to 2030 would be as shown in Figure 3: Fig. 3: Trend of diabetes incidence in Australia to 2030 (Derived from figures in Moon, 2010) With an annual population growth rate of approximately 1.4% (Australian Bureau of Statistics, 2012), Australia will have a population of about 30 million by 2030; factoring in a potential diabetes prevalence of 6.88% results in an incidence of 20.64 per 100,000 population, two-and-a-half times the current rate. This would be in line with observations of past diabetes rates, which doubled in the 19 years between 1981 and 2000, and the rate of increase of obesity in the population, particularly among children (Magliano, et al., 2008, 171). In terms of costs, if the 2007 per-patient average of $7,566 is taken as a constant (i.e., without compensating for inflation), the annual health costs for diabetes-related care will grow to $15.6 billion by 2030. If the projection is applied to the intangible costs measured by DALYs (Pieris-Caldwell, et al., 2008, 83), by 2030 diabetes could cost Australia about 282,000 years’ worth of its citizens’ productive lives. Potential Impact on the Health System The enormous cost of the potential increase in diabetes prevalence in Australia presents an obvious challenge to effectively managing and preventing the disease in the future. At this point, however, in the absence of projections in the literature about the potential funding of health care in Australia so far into the future as 2030, the assumption is made that health care expenditures will be roughly proportional – about 9.1% of GDP (Braddock, 2010, 409) – to the present time. This may not be sufficient to provide all the diabetic patients who need it, with access to care. However, in a 2001 study, between 14% and 21% of below-average income earners, and between 8% and 18% of above-average income earners did not seek some form of medical care required, or experienced trouble paying for medical bills due to high costs (Blendon, et al., 2002, 185). There may also be some geographical or cultural aspects to people seeking health care; a 2005 study designed to test performance measurement techniques for diabetes treatment programs in Northern Territory health centres in indigenous communities, showed only 77% of the study group adhered to the schedule of check-ups and treatments. This is particularly worrisome since Aboriginal peoples have the highest incidence of diabetes amongst all Australians (Si, et al., 2005, 4). An increasing number of diabetic patients also present a problem with respect to health care manpower. While employment opportunities in the health care field continue to increase along with the number of people completing health occupation courses, the medical workforce in Australia is aging – 18% were over the age of 55 in 2008, compared to only 13% five years earlier. The number of primary care doctors is also decreasing, while specialists are increasing (Braddock, 2010, 406). This suggests that on the one hand, medical professionals to address the related problems of diabetes such as neurological and vascular disorders will be in good supply in the future, but on the other hand, general practitioners to oversee routine health monitoring, diagnoses, and non-specific diabetes treatment may be in short supply. This fact may result in potential delay in recognition of the disease in some patients, and may make treatment more complicated and costly, which in turn would increase health insurance costs. Health Economic Techniques to Respond to Future Impacts of Diabetes The indicated goal of diabetes-related health programs is to reduce the number of DALYs associated with the disease. This goal aligns the prevention/education efforts put towards diabetes treatment to reduce the number of people contracting the disease - such as programs designed to reduce childhood and adult obesity - with the treatment of the disease and its related conditions. From that standpoint, the cost-benefit analysis (CBA) approach and the cost effectiveness analysis (CEA) approach should be used in tandem to properly assess the allocation of health resources. CBA analysis is more suited to the assessment of prevention programs, such as obesity treatment, medical screening, and public education; the costs of providing a prevention program can be easily compared to the costs of a treatment program for a particular kind of patient, since the latter is likely to be already known. CBA analysis used for diabetes prevention and treatment programs mainly focuses on the “human capital” method of cost valuation of programs, because diabetes is a chronic condition; the “revealed preferences” and “willingness to pay” approaches are likely not valid, since the alternative for patients is ultimately a hastened death from diabetes or diabetes-related conditions. However, the analysis of the value of ‘human capital’ would not be applicable to all patients; as explained earlier, diabetes is more common among older patients, so the value of healthy years according to a calculation using average market rate wages would probably be minimal, since many diabetes patients are already beyond working age or are relatively near retirement. The analysis would, however, still be a consideration for younger patients, since the trend of increasing incidence among younger people obviously indicates that diabetes-related health problems would be carried into these patients’ working-age years. For these patients, CEA would provide an alternate approach. CEA is also indicative for treatment programs for patients actually suffering from diabetes, because it allows assessment of intermediate health care outputs. For example, high cholesterol levels are a risk factor for complications in patients with Type 2 diabetes (Parsons, Wilson, & Scardigno, 2000, 11-13). CEA analysis allows a proper assessment of the costs and benefits of a program to reduce diabetic patients’ cholesterol, according to a simple measure of reduced DALYs, whereas an alternative method such as CBA would not. In this example, cholesterol-reduction treatments can be compared to treatment programs that do not have a cholesterol-reduction component, and the difference between the two groups of patients’ lifespan and quality of life quantified in number of DALYs reduced, and program cost per DALY. Conclusions Diabetes, and in particular the largely preventable Type 2 diabetes, is a critical chronic health issue that is growing to epidemic proportions. Australia is facing a serious problem now with high rates of diabetes incidence, and faces an even more challenging future if the current trends continue. Treatment of diabetes must occur along two pathways; first, prevention of the disease through management of risk factors that can be controlled – obesity, poor diet, and inactive lifestyles – and second, appropriate long-term treatment programs that reduce the chances of complications from related conditions such as vascular problems. To manage the diabetes epidemic, the health care system essentially has only a fixed budget to work with, because the increase in the prevalence of the disease and the associated real costs associated with that in all likelihood precludes any significant proportional increase in the amount of health care spending. On that basis, resource allocation judgments should be made using a combination of cost-benefit analysis and cost effectiveness analysis approaches, a methodology that “covers all the bases” as it were, accounting for the varying conditions in prevention and treatment programs that must cover a wide range of age groups and a variety of medical conditions that often accompany diabetes. References Armstrong, B.K., Gillespie, J.A., Leeder, S.R., Rubin, G.L., and Russell, L.M. (2007). Challenges in health and health care for Australia. Medical Journal of Australia, 187(9), 485-489. Australian Bureau of Statistics. (2012). Australian Demographic Statistics, Sep 2011. Australian Bureau of Statistics, 29 March 2012. http://www.abs.gov.au/ausstats/ abs@.nsf/mf/3101.0. Blendon, R.J., Schoen, C., DesRoches, C.M., Osborn, R., Scoles, K.L., and Zapert, K. (2002). Inequities in Health Care: A Five-Country Survey. Health Affairs, 21(3), 182-191. Bradley, C. (2001). 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