Transcript Economic models

“Economic Models”
Steve Morris
Professor of Health Economics
UCL Epidemiology and Public Health
“The Future of Healthcare in Europe”, 13 May 2011
Life, death and big business: why health
economics is important
Health care sector of the economy is very
large
• Total expenditure on health as % GDP
• Size of health workforce
• Household out of pocket expenditures on health
Total expenditure on health as % GDP, 2008
(WHO Health Statistics, 2010)
Total expenditure on health as % GDP, 2008
(WHO Health Statistics, 2010)
Size of health workforce, 2008
(WHO Health Statistics, 2010)
European
Region
Total number
Physicians
2,877,344
Density per
10,000
population
33
Nursing and
midwifery
Dentists
6,020,074
68
428,343
5
Household out of pocket expenditures on health,
2008
(OECD Health Data, 2010)
Country
Austria
Belgium
Czech Republic
Estonia
Finland
France
Germany
Hungary
Iceland
Italy
Netherlands
Norway
Poland
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
United Kingdom
US$ PPP
600
817
280
248
583
273
487
343
515
558
233
756
272
447
298
602
543
1424
347
Health and health care are affected by the
economic environment and economic
constraints
• Decisions about how health care is funded,
provided and distributed are strongly influenced
by the economic environment and economic
constraints
• Global, national and local policy responses to
health issues are increasingly being informed by
economic models
Modelling in economics
• In economics, a model is a theoretical construct that
represents economic processes by a set of variables and a
set of logical and/or quantitative relationships between
them
• Useful because:
– Expression of concepts in formal language promotes clarity
– Implicit assumptions easier to detect
– Derive all implications of explicit assumptions
– Promotes logical coherence
Gravelle, H. Connecting health and economics. Centre for Health Economics, York, 2011.
The scope and contribution of health
economics
The scope of health economics
A. Meaning, measurement
and valuation of health
F.
Economic
evaluation
B. Influences on health and
the demand for health
C. Demand for healthcare
E. Market
equilibrium
D. Supply of healthcare
G. Planning, budgeting,
monitoring & regulation
H. Evaluation at the
whole system level
Adapted from: Williams, A. “Health economics: the cheerful face of the dismal science?” In Health and
Economics, A. Williams, Macmillan, London, 1987.
A. Meaning, measurement
and valuation of health
• Measurement of health outcomes
– E.g., EQ-5D (Brooks, 1996)
• Measurement of health gain
– QALYs (Williams, 1985), DALYs (Fox-Rushby, 2002), HYEs
(Mehrez and Gafni, 1989)
• Monetary valuation of health states
– Equivalent and compensating variation (Johansson, 1991)
– Discrete choice experiments (Ryan and Farrar, 2000)
• Non-monetary valuation of health states (Torrance, 1986)
– Standard Gamble , Time Trade Off, Rating Scale
– Multi-Attribute Utility measures
B. Influences on health and
the demand for health
• Mainly jurisdiction of epidemiologists and others
– e.g., CSDH (2008), Marmot Review (2010)
• Accounting for endogeneity issues
– Total health expenditure on population health (Martin
et al., 2008)
– Doctor supply on health (Gravelle et al., 2008)
• Impact of macroeconomic conditions on health
– “Health living in hard times” (Ruhm, 2005)
– Technological change and obesity (e.g., Cutler et al.,
2003)
C. The demand for health care
• (Derived) demand for health care
•
•
•
•
– Derived from the demand for health (Grossman, 1972)
Impact of health insurance
– RAND Experiment (Manning et al, 1987)
Asymmetry of information
– Supplier-induced demand (Evans, 1974)
Understanding patient choices
– Discrete choice experiments (Burge et al, 2005)
Estimating demand functions
– Demand for health insurance (Propper et al., 2001)
D. The supply of health care
• Goals of providers
– Internal firms (Harris, 1977)
– Utility maximisation (Newhouse, 1970)
– Physician income maximisation (Pauly and Reddisch, 1973)
• Provider behaviour
– Doctor performance under pay for performance (Gravelle et al., 2010)
– Provider behaviour and prospective reimbursement (Ellis and McGuire,
1986)
• Costs and relative efficiency
– Cost frontiers for hospitals (Linna, 1998)
• Health care labour markets
– Determinants of GP wages (Morris et al., 2011)
– Supply of nursing labour (Antonazzo et al., 2003
E. Market equilibrium
• Rationing
– Role of price and non-price factors (Gravelle et al., 2002)
– Rationing by waiting (Gravelle and Siciliani, 2008)
• Market failures
– Why health care is ‘different’ (Culyer, 1971)
– Caring externalities (Jacobssen et al., 2005)
• Impact of market structure
– Competition and prices (Propper, 1996)
– Monopsony in the labour market for nurses (Hirsch and
Schumacher, 2005)
F. Economic evaluation
• Many, many examples! (see NHS EED)
• Formalised role in regulatory bodies in many
countries
• Generally agreed set of basic principles with
variations by country in specifics (www.ispor.org)
• Increasingly sophisticated analytical techniques
– Decision modelling – decision trees, Markov models,
microsimulations, and much, much more!
– Economic evaluation alongside clinical trials
– Dealing with uncertainty
G. Planning, budgeting,
monitoring & regulation
• Resource allocation formula
– Methods for computing weighted capitations (Chernichovsky and
van de Ven, 2003)
• Using economic evaluation
– Cost-effectiveness league tables (Drummond et al, 1993)
• Policy evaluation
– Impact of health policy on waiting times (Propper et al., 2008)
• Regulation in health care
– Regulating prices and profits in the pharmaceutical industry (Bloom
and van Reenen, 1998)
H. Evaluation at the
whole system level
• Inequality measurement
– Welfare foundations of inequality measures (Fleurbaey and
Schokkaert, 2009)
– Gini coefficient as a measure of total health inequality (Le Grand,
1989)
– Concentration index for the measurement of socioeconomic-related
health inequality (Wagstaff, 2000)
– Decomposition of the concentration index (Wagstaff et al., 2003)
– Health achievement index (Wagstaff, 2002)
• Impact of spending on health (Nolte and McKee, 2004)
Moving beyond economic evaluation
Scope for increased use of economic
evaluation in decision-making
• There has been a massive increase in recent years in the use of
economic evaluation
• But not in all areas (notably public health)
• There is still considerable scope for extending its use in decision making
in health care
• A survey of health care decision-makers in Austria, France, Finland, The
Netherlands, Norway, Portugal Spain and the UK revealed that only onethird said they considered the results of a health economics study when
making a decision (Von der Schulenberg, 2000) .
• The authors suggested that an important factor hindering greater use
was lack of knowledge about the techniques of economic evaluation
Mismatch between the science of evaluation
and the art of decision making
• Huge advances in economic evaluation during the last decade have
occurred in the development of statistical and modelling techniques
• But these developments have not been matched by development of
decision-making processes they seek to support:
• Research on the value of a QALY is only in its infancy
• There has been little research to examine the way in which decisionmakers use evidence from advanced economic evaluation methods (e.g.,
cost-effectiveness acceptability curves to reflect uncertainty), if at all
• The incorporation of explicit equity weights into economic evaluation is
feasible, yet research on this issue has yet to have an impact on practice
Health economics is not just about
economic evaluation
Health economics is not just about
economic evaluation
F.
Economic
evaluation
Health economics is not just about
economic evaluation
A. Meaning, measurement
and valuation of health
F.
Economic
evaluation
B. Influences on health and
the demand for health
C. Demand for healthcare
E. Market
equilibrium
D. Supply of healthcare
G. Planning, budgeting,
monitoring & regulation
H. Evaluation at the
whole system level
“The purpose of studying economics is not to
acquire a set of ready-made answers to economic
questions, but to learn how to avoid being deceived
by economists.”
Robinson, J. Collected Economic Papers, 1951-1980 Vol II. MIT Press, Cambridge, 1980. p.17.