Priority Setting in Health Combining Health and Economic
Priority Setting in Health: Combining Health and Economic Outcomes David Canning First CHa. RMS Workshop: Health in Northern Ireland a Changing World" Queen’s Management School June 19, 2017
Health Systems Goals • Improve health • Financial risk protection • Patient Satisfaction • Equity focus
Economic effects of Rural Health Insurance and Pension Reforms in China (% consumption equivalent) Rural Pension Urban Rural Health Insurance China Urban Rural China Total -1. 21 -0. 37 -0. 53 -1. 48 9. 70 7. 29 Consumption -0. 71 -0. 45 -0. 54 -0. 79 -1. 73 -1. 38 Consumption Risk -0. 30 0. 25 0. 18 -0. 17 1. 07 0. 67 Leisure Level -0. 00 0. 11 0. 08 -0. 07 1. 79 1. 28 Leisure Risk -0. 18 -0. 25 -0. 22 -0. 45 8. 61 6. 76 Level 8
Policy Setting and Welfare: • Inconsistency between health and economics! • Health uses cost effectiveness analysis – Rank projects by cost per QALY gained – Limited domain – health benefits • Economics uses cost benefit analysis – Rank projects by money benefits versus money cost – Complete domain
Cost Benefit in Health • Value of life higher for richer people • Saving a rich life is worth more than saving a poor life • Goal of health system should be to maximize money value - health adjusted by willingness to pay • Very difficult morally • Money as a welfare metric?
WTP “Value” of Life by Income Quintile: United States 25 $ Millions 20 15 10 5 0 0 20000 40000 60000 80000 100000 $ Household Income 120000 140000 Viscusi 2011
Cost Effectiveness • Measures only “health” benefits- what is health? • Costs in money units • Can decide priorities between health interventions but not the total funding level • Difficult to add in non-health benefits of interventions – patient satisfaction, financial risk protection • Extended cost effectiveness, Multi Criteria Decision Making
Do we need a social welfare measure? • If social decisions are based on an ordering that is complete, transitive, and continuous then there exists a continuous social welfare function W(x) satisfying these preferences. • If actual social choices reflect such an ordering they reveal the social welfare function • The social welfare function can be treated as an empirical question
Devlin and Parkin 2004
Applied Utilitarianism • Single Valued Welfare Function – Cost Benefit Analysis – Weighted Cost Benefit Analysis – Human Development Index – Full Income (value life in money terms) – Happiness adjusted life years
Cost Benefit Analysis as Applied Utilitarianism • We can measure utility changes in a money metric – money equivalent of proposed change • Take social welfare change to be sum of money metric utility changes • If positive we have Potential Pareto Improvement with compensation • Without compensation we assume social value of money is equal across people – bizarre
WTP “Value” of Life by Income Quintile: United States 25 $ Millions 20 15 10 5 0 0 20000 40000 60000 80000 100000 $ Household Income 120000 140000 Viscusi 2011
Value of Life by Income Quintile 1, 2 1 Lives 0, 8 0, 6 0, 4 0, 2 0 0 20000 40000 60000 80000 100000 $ Household Income 120000 140000
Value of Money by Income Quintile 0, 35 0, 3 Lives/Million 0, 25 0, 2 0, 15 0, 1 0, 05 0 0 20000 40000 60000 80000 100000 $ Houshold Income 120000 140000
Income in Standard Life Year Equivalents
Income in Standard Life Year Equivalents
income-adjusted life expectancy Brazil China Egypt Ethiopia Ghana India Malawi Mexico Nigeria US Average Household income per capita Gini coefficient Life Expectancy $6, 729 $4, 340 $2, 873 $904 $3, 989 $1, 231 $480 $4, 189 $1, 625 $26, 110 0. 52 0. 63 0. 29 0. 51 0. 70 0. 38 0. 45 0. 51 0. 39 0. 48 74. 65 75. 85 70. 78 62. 08 64. 44 65. 77 57. 19 75. 13 59. 91 78. 49 Income Adjusted adjusted life Life expectancy Expectancy Average Household household Income per income per Capita capita 46. 70 32. 97 40. 13 20. 32 37. 08 20. 82 5. 03 3. 15 17. 98 15. 12 22. 50 6. 43 3. 91 1. 11 48. 25 24. 20 22. 08 9. 01 78. 49 68. 22
Relation between income adjusted life expectancy and life expectancy
Relation between income-adjusted life expectancy and log GDP per capita
Income-adjusted Life Expectancy and Country-Level Indicators Life Expectancy 1. 64*** (0. 19) Log[Average y] Income adjusted life years 0. 40** (0. 16) 15. 25*** (1. 10) 13. 01*** (1. 71) Gini coefficient y Constant R-squared Countries * p < 0. 10, ** p < 0. 05, *** p < 0. 01 0. 24* (0. 14) 14. 34*** (1. 70) -17. 09*** (6. 18) -94. 57*** (12. 81) 0. 605 53 -101. 23*** (8. 36) 0. 895 53 -111. 04*** (8. 46) 0. 910 53 -103. 06*** (7. 18) 0. 926 53
Implications • Economic benefits can be converted to life years using willing to pay for money studies to get life year equivalents • Diminishing marginal utility of money means society wishes to redistribute money from rich to poor – income inequality lowers national welfare
- Slides: 26