Welcome to Segment 2, CEA Approach and ICERS. In segment 1 you considered why CEA can be
useful. In this segment, you'll learn how the cost-effectiveness idea is translated
into an outcome metric the incremental cost-effectiveness ratio.
First, let's discuss the central CEA approach.
We look at the incremental cost per standardized unit of health gain. This could be the added
cost per death averted or life year gained. For whatever intervention you're assessing,
you have to compare to another identified course of action. That course of action may
be a standard practice like visiting doctors, or it may be a less expensive or less intensive
intervention. Whatever the , comparison, it always has to be specified.
I want to emphasize that this is one of the critical elements of doing a CEA correctly:
saying what you're comparing to what. No intervention can be properly considered in isolation.
It's also important to note that cost effectiveness ratio, the cost per standardized unit of health
gain, is the inverse of health gain per increment of spending. If you get more added health
per increment of spending, then you're spending less per added unit of health.
The key outcome metric for CEA is the incremental cost effectiveness ratio: the ICER. This is
the difference in cost, represented as delta cost, divided by the difference in health
outcomes. The differences are between two possible actions, here called A and B. Thus
the ICER is the cost of one option A minus the cost of option B all divided by the difference
in life years. As I said, everything's comparative.
I want to talk more about the need for comparison, by showing an example of what happens without
comparison. Let's say I want to examine the cost-effectiveness of Drug A, in this table.
A person takes drug A, and it costs $12,000, and that person lives 40 years. Yet it's clearly
misleading to assign all of this health, these 40 life years, to drug A, because without
drug A the person would still live 38 life years. Thus, to understand the value of Drug
A, we should not divide $12,000 by 40 and say that $300 is cost of Drug A per added
year of life. Instead, what we care about is the change
in health due to the intervention. So, we need a comparison -- an option B, so
that we can think about the incremental cost and life years. You can't calculate an ICER
when you have only one option. It has to be comparative.
The ICER Numerator is the net costs and that's different from the costs of implementation.
Net cost is program costs adjusted for the resulting changes in medical costs. Medical
costs can fall if you avert disease, with a prevention strategy such as vaccination
or HIV prevention through needle exchange. If you avert disease, you save the cost of
treating that disease. On the other hand, sometimes an intervention
can increase healthcare costs. If you have a screening program you find people with disease.
Obviously, you may start to treat them. Or you have a plan to deliver antiviral therapy
earlier in disease. Added or earlier care will increase the health care costs.
So when you put all of these factors together and compare the program costs to the health
care costs you arrive at the net cost of A -- the cost of the program adjusted for induced
costs or savings, minus the same type of net cost for B. That's the numerator.
The denominator is the difference between options A and B in terms of one of several
possible measures of health. In one cost-effectiveness report, you can examine multiple outcomes.
Let's start with natural health events. Examples are new infections, deaths averted, life years,
or disease episodes. It's fine and in fact it's important to present the effectiveness
of the program in terms of outcomes that people can understand particularly when we're presenting
to clinicians and other non-economists. Everyone can understand if you say it costs $1000 to
avert a new infection or $500 to prevent a death or $50 per added life year. This is
the kind of statement that makes sense to all of our health colleagues.
However, there are limits to what kind of comparisons we can make when we use natural
health events. It's hard to compare a measles episode prevented to an added life year.
This is why we use metrics like DALYs and QALYs. DALYs, or disability adjusted life
years, are a measure of disease burden. By definition they are undesirable -- we want
to avert DALYS. QALYs are a measure of health status and therefore they're desirable. We
want to gain them. Why do we go to the extra trouble of DALYs
and QALYs? It's because we want to capture all of the effects of disease. If we look
just at life years, we capture only the reduced mortality benefits of intervening. If we talk
about quality of life we might capture the effects of reducing morbidity. If we want
to put it all together and compare across different diseases that's when DALYs and QALYs
become helpful, indeed essential.
When we put the numerator and denominator together, we get the ICER: the difference
in net costs divided by DALYs averted.
Note that the order of the subtraction in the numerator and denominator is different,
because the numerator is added costs but the numerator is averted DALYs.
In segment # 3, we take a closer look at DALYs and QALYs, over-arching, uber metrics in health. 2014 Global Health Economics Colloquium- Registration https://jfe.qualtrics.com/form/SV_dnm3bgw7HDCS10h. http://healthpolicy.ucsf.edu/event/2nd-annual-g%D0%BD%D0%B5%D1%81on-colloquium-november-21 Hi Lena, (Jay can you insert the qualtrics survey somewhere on the website so folks can register)? Thanks so much for all your help! Here's the link to the registration page: https://jfe.qualtrics.com/form/SV_dnm3bgw7HDCS10h. The last time I checked there were 80 registered participants. I would love it if Ashli can send me (not Jim) the following weekly stats: Names how many participants, # who are faculty vs. students. The answer to the question: How would you describe yourself? institution affiliation What areas of global health economics most interest you (check up to 3)? Thanks so much! Devon http://youtu.be/b9PHwhyxIQI https://www.youtube.com/my_videos?o=U http://youtu.be/b9PHwhyxIQI?list=PLPdSQGGMt89e4_ObAbU8F8ZASfgAoNVH9 4 is wrong http://youtu.be/ZNSPUJ--G2k http://youtu.be/ZNSPUJ--G2k?list=PLPdSQGGMt89e4_ObAbU8F8ZASfgAoNVH9 ?list=PLPdSQGGMt89e4_ObAbU8F8ZASfgAoNVH9 https://www.youtube.com/my_videos?o=U Congratulations @UCSF_IHPS #AndyBindman on your @RWJF SHARE grant! @ahyman254 @AcademyHealth @SHADAC @healthaccess bit.ly/reformgrants