This may come out of left field; however, this is something that I have been working on for the past 2 months. As an ever increasing amount of pressure is placed on the financing of public programs, there will be greater need to evaluate the cost effectiveness of public programs. In public health programs in particular, there is a push to measure the effectiveness in terms of Quality-Adjusted Life Years (QALYs). The measurement of public health programs in terms of QALYs has become common practice in Europe, and is a key part of the success of the National Health System in England. I have put together a brief on the use of QALYs in cost-effectiveness analysis.

Cost-Effectiveness Analysis
Driven by the increasing scarcity of public health program resources, and additional pressure for improved efficiency, a great deal of research has been conducted on the method for conducting cost-benefit (CBA) and cost-effectiveness (CEA) analysis for public health programs. Although there are differences in cost-benefit analysis and cost-effectiveness analysis, the substantial differences exist between the two analyses in the measurement of the benefit (the denominator), and not in the program costs (the numerator). The similarities in the measurement of program costs, increase the scale of literature that can be studied for the purpose PDA’s research on the inclusion of costs.

Seeking to standardize the methodology for cost-effectiveness analysis a Panel on Cost-Effectiveness in Health and Medicine (the Panel) was formed by the US Public Health Service and issued recommendations in 1996. (Weinstein et al. pp. 1253 – 1255) The recommendations of the Panel listed the costs that should be included:
• Costs of health care services
• Costs of patient time expended for the intervention
• Costs associated with care giving
• Other costs associated with illness, such as child care and travel expenses
• Economic costs borne by employers, other employees and the rest of society, including so-called friction costs associated with absenteeism and employee turnover
• And costs associated with non-health impacts of the intervention, such as on the educational system, the criminal justice system, or the environment.

The costs recommended to measure by the Panel include both indirect and direct costs associated with an intervention or treatment. (Henderson p. 126) The direct costs are those incurred in providing care; whereas, indirect costs are those not associated with the transactions for goods or services. Additional recommendations by the panel regarding the inclusion of costs were: costs included in the numerator should be measured in constant dollars, include time costs at the valued wage of workers, and should consider the opportunity cost. To account for the opportunity cost, it should measure the marginal cost of the intervention, not the total cost of the program. “Costs unaffected by the level of implementation of an intervention should generally be excluded from consideration.” (Weinstein et al. p. 1255)

Regardless of the recommendations passed by the Panel, the quality of implementation of cost-effectiveness analysis in the United States varies greatly. A review of 14 public health cost-effectiveness studies from 1998-2002 has shown different methodologies used for each. (Gross et al. pp.369) However, there is an amount of literature around best practice in cost-effectiveness analysis in public health, and the promotion of standardized practices.

The direct costs associated with smoking cessation interventions can be decomposed into four components: the screening costs; the costs associated with advising smokers; motivating unwilling smokers; and the direct intervention costs incurred in helping smokers quit. (Cromwell et al. p. 1760) These costs can also be characterized as the cost identification, or “the calculation of the cost of an intervention as the opportunity cost of resources consumed.” (Grosse et al. 370) These costs would differentiate themselves among the five categories of intervention: minimal, brief, full, individual intensive and group intensive. The need to differentiate among the variation of the five categories is due to the relationship between intervention intensity, cost and effectiveness. As the intensity of a tobacco intervention program increases, so do the costs and the effectiveness, affecting both sides of the cost-effectiveness ratio. (Parrott and Godfrey p. 948) Examples of specific costs to be included are: labor costs, materials and supplies, pharmacotherapy or NRT, professional services, screening, administrative, patient time, and more.

The indirect costs measured are the productivity costs that are not associated with the intervention, also called the social costs. (Henderson p. 126) These costs are the future costs of intervention, as compared with no intervention, and reflect the cost of the illness. Inclusion of indirect productivity costs increase the relative cost-effectiveness of interventions that promote greater survival among younger or working-age adults relative to interventions that promote survival at older ages, but in general do not affect cost-effectiveness rankings. (Grosse et al. 370) Examples of individual productivity costs are the economic value of lost leisure time, or the morbidity that results in time lost from work. The productivity costs of the intervention program are not limited to the individual participant, but can extend to external systems, such as the non-health impacts on the education system, criminal justice system or the environment. (Weinstein et al. p. 1255)

Quality-Adjusted Life Years
The use of utility units as the denominator in cost-effectiveness analysis varies among multiple sources and studies. The Panel on the Cost Effectiveness of Health and Medicine has recommended that cost-effectiveness analysis use quality adjusted life years as a measurement of benefit from public health programs. (Weinstein et al. 1996) Quality-adjusted life years (QALY) are a representation of “a patients’ perception of the reduction in value of one year in perfect health due to pain, disability, and suffering caused by illness.” (Henderson, p. 127) Perceptions are measured as a weight, determined from surveys where individuals are asked a series of questions about their perception of their current health status, and their health status preference. The advantage of consistent measurement of benefits through QALY allows for the cost per benefit measured across different health interventions, assisting decision-makers to determine the most efficient way to furnish health benefits. (Neumann and Greenberg, 2009)

How a QALY is calculated
Patient x has a serious, life-threatening condition.
• If he continues receiving standard treatment he will live for 1 year and his quality of life will be 0.4 (0 or below = worst possible health, 1= best possible health)
• If he receives the new drug he will live for 1 year 3 months (1.25 years), with a quality of life of 0.6.
The new treatment is compared with standard care in terms of the QALYs gained:
• Standard treatment: 1 (year’s extra life) x 0.4 = 0.4 QALY
• New treatment: 1.25 (1 year, 3 months extra life) x 0.6 = 0.75 QALY
Therefore, the new treatment leads to 0.35 additional QALYs (that is: 0.75 -0.4 QALY = 0.35 QALYs).
• The cost of the new drug is assumed to be £10,000, standard treatment costs £3000.
The difference in treatment costs (£7000) is divided by the QALYs gained (0.35) to calculate the cost per QALY. So the new treatment would cost £20,000 per QALY. (NHS, 2010)
Concerns with QALYs
Concern has been expressed about the use of QALYs in cost-effectiveness analysis due to the individual measurement of health preference weights, population measured for health preference, and the equity of measurement. In determining the health preference weight, many researchers use a scale 0-1, with 1 being perfect health, and 0 being death; however, the questions used to measure preference may vary, affecting individual responses. (Neumann and Greenberg, 2009) Additionally, the population surveyed to determine health preference can dramatically affect the preference weight. Consensus has not been achieved on whether health preference should reflect those that are ill, or those that are not, each having different measured health preference. Individuals with illness value their health state, even if diminished, more than those that are not ill. (Neumann and Greenberg, 2009) The variation in the measurement of health preference weights limits the ability to compare the cost-effectiveness across multiple forms of health interventions and treatments. (McGregor and Caro 2006) Finally, debate exists on the issue of fairness in the use of QALYs to measure cost-effectiveness. Because QALY is a measurement of marginal utility over time, programs that assist disabled or elderly populations will always have a worse cost per QALY ratio, than those that benefit younger populations. (Grosse et al. 2007) Some researchers argue that due to concerns over fairness, alternative measures should be used, such as willingness-to-pay; although similar methodological issues exist for alternatives.

Although there are several concerns regarding the use of QALYs as a measure of health benefit, the need of a standardized measure for health benefit is consistently referenced. Even with variation in methodologies, flexible use of QALYs could be beneficial for decision-makers. (Neumann and Greenberg, 2009) International partnerships have been formed to resolve issues regarding standardization of methodology, and acceptability, and resources have been created to assist those interested in pursuing QALY cost-effectiveness studies.

Welcome

As we have seen during the Health Care Debate, facts do not always sway the minds of the citizens. Then, as many times, public opinion was manipulated by media campaigns, and ideas that are designed to trigger an emotional, often irrational, response to a proposed idea in hopes of rallying support or opposition. The discussion that follows becomes devoid of a balanced viewpoint, thoughtful analysis, or often any form of critical thinking. This represents the failure of dialogue in democracy. If our democracy is to work, then the level of dialogue, and the quality of discussion needs to improve, focusing on debates and discussions around the value of policy consequences, and not emotional reactions.

The purpose of this blog is to examine issues in the public interest, and examine them with a thoughtful research based approach. By know means will I attempt to replicate academic literature, that is often out of touch with the political reality, but will attempt to translate, convert or synthesize proposed policy solutions and ideas based on their merit, feasibility and consequences. By no means do I suggest that I know the answers, or that my analysis will be perfect, but I do hope that my posts will assist in elevating the discussion.