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L2 Health Indicators and The Value of Health PDF
L2 Health Indicators and The Value of Health PDF
Department of Economics
Spring 2020
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Health Indicators I
What is health?
“a state of physical, mental, and social well-being and the absence of
disease or other abnormal condition” (Mosby Medical Encyclopedia)
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Health Indicators II
Measuring health
Mortality
Life expectancy
Morbidity
Disability
Well-being
Productivity
Absenteeism and presenteeism
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The Value of Life I
One of the most di¢ cult but often unavoidable tasks in health care is
to place a value on human life
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The Value of Life II
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The Value of Life III
Value of life = willingness to pay for a marginal reduction in survival
probability?
Identi…ed life versus statistical life
Suppose an individual derives utility of consumption u (c )
The individual will survive into the next period with probability
p 2 [0, 1]
If the individual does not survive, his utility is zero
Hence, his expected utility is:
E [u ] = pu (c )
Advantage: operational
Issues?
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The Value of Life V
Willingness to pay
Rooted in subjective valuations – marginal considerations
Questionnaires /surveys
Issues?
Con‡icting and inconsistent results
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Estimates II
Other studies:
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Valuing Health I
Weighs time with a health index that ranges between reference points
0 (death) and 1 (perfect health)
Illness reduces the quality of life - discounts the value of life in poor
health: a trade-o¤ between time and health
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Valuing Health II
Other
Physical functioning:
Number of Activities of Daily Living (ADL) limitations
Number of Instrumental Activities of Daily Living (IADL) limitations
Cognitive impairment
Depression (CES-D)
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Rating and Estimation I
Rating Scales
Category scale: present rater with scenario; rate on ladder from 0
(death) to 10 (perfect health)
Decision Tree
Suppose surgical procedure with two possible outcomes PH and D
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Rating and Estimation II
Standard gamble:
E [u ] = (1 p )u (PH ) + pu (D )
Clear and simple but not useful for more complex processes
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Rationale and Examples I
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Rationale and Examples II
Examples
What combinations of HIV drugs should people receive?
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Various Methods I
Cost-bene…t analysis
Monetary valuation of outcomes
Cost-e¤ectiveness analysis
Natural unit of outcome eg. change in mortality
Cost-utility analysis
QALYs used to measure/value outcomes
Cost-minimization analysis
Outcomes are equivalent
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Various Methods II
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Various Methods III
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Pros and Cons I
Advantages
Make underlying assumptions explicit: alternatives are professional
opinion, rely on statements by special interest groups, e.g.,
pharmaceutical manufacturers, doctors’associations, etc
CBA/CEA provides a consistent framework for evaluating alternatives
Helps separate use of objective empirical evidence from subjective value
judgments
Limitations
Analysis does not give decision maker full evidence on alternatives
Populations are heterogeneous: evidence on which CBA/CEA is based
may not apply to decision-maker’s population
Long-run e¤ects not adequately documented
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Pros and Cons II
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General Procedure I
Measure costs
Measure bene…ts
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Perspective of Analysis I
Hospital perspective
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Cost Measures I
Direct cost
Value of all goods and services consumed in provision of the
intervention or in dealing with side e¤ects or other current or future
consequences of intervention
Indirect cost
Productivity costs (morbidity costs, mortality costs, cost of replacing
sick worker)
Danger of double-counting
Intangible cost
Pain, su¤ering, dis…gurement, etc
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Cost Measures II
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Modelling I
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Markov Models I
Principal components
Useful for diseases with various stages and/or if events can occur
repeatedly over time (e.g., AMI, cancer recurrence)
Memory-less model
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Example I
Markov states
Localized cancer
Localized recurrence
Metastatic disease
Death
Cycle
Months, year - depends on timing of events and expected life of
population
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Example II
Transition probabilities
Represented by an n n matrix A = (aij )
Here, aij 2 [0, 1] is the probability that person in state i will transit to
state j
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Example III
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Example IV
Evaluation
Cohort simulation - tracks a hypothetical cohort simultaneously
(average patient)
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Example V
Monte Carlo simulation - randomly selects patient from cohort and
sends through system one at a time
After cycle 2:
2 3T 2 3 2 3T
0.945 0.945 0.006 0.014 0.035 0.893
6 0.006 7 6 0 7 6
0.913 0.052 0.035 7 6 0.011 7
6 7 6 = 7
4 0.014 5 4 0 0 0.607 0.393 5 4 0.022 5
0.035 0 0 0 1 0.074
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Example VI
Pattern:
Pk = Pk 1A
Five cycles
2 3
Cycle 1 2 3 4 U CU
6 0 1 0 0 0 0.475 0.475 7
6 7
6 1 0.945 0.006 0.014 0.035 0.908 1.383 7
6 7
6 2 0.893 0.011 0.022 0.074 0.866 2.249 7
6 7
6 3 0.844 0.016 0.026 0.114 0.825 3.074 7
6 7
4 4 0.797 0.019 0.029 0.155 0.784 3.858 5
5 0.754 0.022 0.030 0.194 0.746 4.604
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