Economic Analysis

CHAPTER 20 Economic Analysis

Resources used to provide health care are vast, but not limitless.

—Mike F. Drummond et al.1

The measures of effect we have considered so far are purely scientific. They steer us toward a particular pathway on the noble principle of providing live longer/feel better outcomes to improve people’s existence. Yet we live in a world of limited resources, so practicing medicine effectively requires some degree of economic consideration. As the population increases and ages, the cost of treatment will continue to rise, especially for conditions that are prevalent and relatively expensive to treat. Economic analysis is an approach that takes into account not only the live longer/feel better measure but also the cost of implementing various interventions.

Cost-effectiveness is a type of economic analysis that quantifies benefit through one of the standard outcome measures that capture mortality, or quality of life (QOL). The measure can reflect reduced QOL that might result from medication side effects, worsening disease, or from a complication of a procedure that would affect overall well-being. In addition, the financial cost of going down this pathway is taken into consideration. This includes not only the up-front costs of a procedure and medication, but can also account for hidden costs from a societal perspective, such as lost income due to inability to work or the cost of a caretaker while a patient is recuperating. Cost-utility studies specifically account for the number of years lived in full health (QUALY), and are considered a type of cost-effective analysis, but the two are often used interchangeably.2

For instance, let us consider a theoretical situation of an expensive surgical procedure that improves eyesight in a prevalent condition that causes impaired vision. The patients can also use eyedrops and get improvement, but their vision improves more if they have the operation. So far, it seems like the operation should be recommended. However, what if several procedures over a number of months were needed to produce the desired result, and each operation carried a small but definite risk of permanent blindness in that eye? What would be the comparative cost and benefit of each pathway? Now the decision is not so straightforward. Let us try to approach this problem using economic analysis.

First, it is important to know that many of these studies look at cost and benefit over several years, often until the subjects have all died from either a complication of their illness or some other cause. Since the exact data are often not available, these models incorporate the available data based on observations of subjects (over several years) who have gone down the various pathways. Simulations are then done on computer programs that project these data into the future, for the rest of the subjects’ lives.

The compared outcomes include cost and benefit for each pathway. The formula for comparison is:

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The outcome data are taken from published trials or other databases (or expert opinion when the above are not available). If we wanted to consider mortality in the above example, we would go to the literature to find the mortality rate for the eye surgery. Otherwise, if the disease has no effect on mortality, we assume that person will live to the expected average age for their gender and disease state. These data can often be found in actuarial tables provided by life insurance companies.

Related posts:

  1. Ethics in Medical Research
  2. Populations
  3. Measures of Disease
  4. Mathematical Principles

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Jun 18, 2016 | Posted by in BIOCHEMISTRY | Comments Off on Economic Analysis

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