Global Health Challenges Social Analysis 76: Lecture 22

1. Global Health ChallengesSocial Analysis 76: Lecture 22 Harvard University Initiative for Global Health

2. Mexican Seguro Popular May 2003 Mexican Congress enacted Seguro Popular extending insurance coverage to the entire population over seven years. Mexican Ministry of Health had to choose what interventions should be included in the health Seguro Popular package. How should they have decided? Harvard University Initiative for Global Health

3. Resources for Health Are Limited How Are Interventions Chosen Now? How Should Interventions Be Chosen? Costing Efficacy and Effectiveness Sectoral Cost-Effectiveness Harvard University Initiative for Global Health

4. Resources Are Limited 9% of world economic product is spent on health systems, in most developing countries 2-5% of GDP is spent on health. Technologies exist to improve health that cost more than the available resources whether nationally or globally. If everyone cannot have access to health improving technologies, how should the technologies (drugs, vaccines, community interventions etc.) be chosen? Harvard University Initiative for Global Health

5. Should Resource Allocation Be Left to the Market? Perfect markets with an equitable initial distribution of resources would be an excellent mechanism to choose the best health programs and encourage efficiency of service delivery. Harvard University Initiative for Global Health

6. Markets for Healthcare Do Not Work Well Public goods – goods that are not used up by consumers who enjoy them, e.g. mosquito control. Externalities – effects of a good or service are not wholly felt by the consumer, e.g. DOTS. Information asymmetries – information about health technologies is difficult to obtain or unevenly distributed. Inequality of initial resources has unacceptable implications for the distribution of health gain. Harvard University Initiative for Global Health

7. Softening Resource Constraints Some public health advocates, e.g. Paul Farmer, argue that we should not accept that resources for health are limited and that the moral imperative of providing health gain if possible demands greater resources. If the moral argument can increase resource flows from high-income countries to low-income countries that would be an important step. However, even if resource flows increase from the current $8 billion a year to $20 or $30 billion, there will be fewer resources than options available. Harvard University Initiative for Global Health

8. Resources for Health Are Limited How Are Interventions Chosen Now? How Should Interventions Be Chosen? Costing Efficacy and Effectiveness Sectoral Cost-Effectiveness Harvard University Initiative for Global Health

9. Drivers of Current Intervention Choice • Inertia – fund this year what was funded last year. • Past capital investments – recurrent costs to sustain past investments such as hospitals can be large. • Donor and advocacy group agendas – international groups whether bilateral agencies, multilaterals like the World Bank or NGOs can have a disproportionate effect on intervention choice. • Political voice – urban elites demand and often receive health resources. • Perceived health priorities – often with a time lag, perception of major problems influences agendas. Harvard University Initiative for Global Health

10. Resources for Health Are Limited How Are Interventions Chosen Now? How Should Interventions Be Chosen? Costing Efficacy and Effectiveness Sectoral Cost-Effectiveness Harvard University Initiative for Global Health

11. How Should Interventions Be Chosen? Answers often fall into two categories: analytical approaches or decision-making processes. Analytical approaches include decision analysis, cost-effectiveness analysis, cost-benefit analysis and distributional/ethical analysis. Decision-making processes focus on the need for stakeholder participation, transparency and democratic accountability. This is a false dichotomy: democratic decision-making processes should be informed by evidence. The question is evidence on what and how should it be presented? Harvard University Initiative for Global Health

12. Three Analytical Approaches Harvard University Initiative for Global Health

13. Other Analytical Dimensions to Intervention Choice Quantification of the impact of an intervention on health inequalities. Absolute magnitude of population health gain if an intervention is delivered. Low opportunity cost for an intervention due to external funding. Concepts of fair chances – everyone should have a fair chance of treatment regardless of outcome. Harvard University Initiative for Global Health

14. CEA Most widely used analytical tool to inform decision-making processes is cost-effectiveness analysis. Methods for CEA have been standardized by several national guidelines and WHO guidelines. Formulaic application of CEA results to resource allocation implies that the sole objective for society is maximizing average population health. Most societies have pluralistic objectives including reducing health inequalities. To date, widely used and accepted tools to incorporate other concerns into intervention analysis have not emerged. Harvard University Initiative for Global Health

15. Resources for Health Are Limited How Are Interventions Chosen Now? How Should Interventions Be Chosen? Costing Efficacy and Effectiveness Sectoral Cost-Effectiveness Harvard University Initiative for Global Health

16. Costing Perspectives • Societal perspective – all resources used by all those involved in providing or using an intervention. • Provider perspective – some studies only examine the costs to the government or other provider. Harvard University Initiative for Global Health

17. Opportunity Cost “Opportunity cost of an action is the value of the best foregone alternative use of those resources. Opportunity cost can only arise in a world where the resources available to meet wants are limited so that all wants cannot be satisfied. If resources were limitless, no action would be at the expense of any other – all could be undertaken – and the opportunity cost of any single action, the value of the ‘next best’ alternative would be zero. Cleary, in a real world of scarcity, opportunity cost is positive.” MIT Dictionary of Economics Harvard University Initiative for Global Health

18. Recurrent Costs • Salaries and wages • Transport and travel • Operations and maintenance • Supplies • Pharmaceuticals and Vaccines • Rent Harvard University Initiative for Global Health

19. Capital Costs Capital items provide services for more than one year. They include: • Vehicles • Equipment • Buildings • Land Harvard University Initiative for Global Health

20. Joint Costs Some costs such as clinics or hospitals are shared by many interventions. Cost-effectiveness studies of specific interventions allocate these costs according to arbitrary joint cost allocation rules. Use of these rules can lead to false conclusions about the cost of scaling up interventions in settings where infrastructure does not currently exist. Harvard University Initiative for Global Health

21. Fixed and Variable Costs Fixed costs in the short to medium term do not vary with the number of units of a good or service that are produced. They may include wages and salaries for clinic staff, equivalent annual cost of a capital good, or rent. Variable costs increase as a function of the number of intervention recipients. Variable costs include drugs, diagnostics, hospital meals or fuel. Harvard University Initiative for Global Health

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23. Average and Marginal Cost Average cost is the total cost incurred to produce a good or service divided by the total number of units of good or service that were produced. Marginal cost is the cost of the last unit of good or service that was produced. In other words, it is the change in total cost when one extra unit is produced. Harvard University Initiative for Global Health

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25. Resources for Health Are Limited How Are Interventions Chosen Now? How Should Interventions Be Chosen? Costing Efficacy and Effectiveness Sectoral Cost-Effectiveness Harvard University Initiative for Global Health

26. Efficacy Efficacy answers the question "can it work?" It is the extent to which health improvements can be attributed to the intervention. To isolate the effect attributable to the intervention, many other factors in the research setting are controlled: i.e. the subjects, the practitioners and the settings. The research is designed primarily to ensure the validity of the estimate of efficacy. Harvard University Initiative for Global Health

27. Effectiveness Effectiveness is the extent to which health improvements attributable to the intervention are achieved in practice settings and field conditions. Effectiveness is about "does it work?" This is one main concern of analysts doing cost-effectiveness analysis - the generalizability/transferability of the estimate of efficacy obtained from randomized control trials to the population where the intervention is expected to be applied. Harvard University Initiative for Global Health

28. Measuring Efficacy • Large Randomized Controlled Trials – deal with unmeasured confounding • Small Randomized Trials • Non-randomized contemporaneous controls • Non-randomized historical controls • No controls, case series only Harvard University Initiative for Global Health

29. Moving From Efficacy to Effectiveness • Biological characteristics – age, sex, severity of illness, comorbidity. • Socio-behavioral characteristics – patient beliefs, adherence, involvement in treatment decisions. • Individual provider characteristics – diagnostic skill, interpersonal skills, choosing the right treatment, surgical/invasive procedure skill. • Provider organizations – intact supply chain, access to information, effective drugs, functioning medical equipment. Harvard University Initiative for Global Health

30. Tuberculosis Chemotherapy Effectiveness Harvard University Initiative for Global Health

31. Resources for Health Are Limited How Are Interventions Chosen Now? How Should Interventions Be Chosen? Costing Efficacy and Effectiveness Sectoral Cost-Effectiveness Harvard University Initiative for Global Health

32. Sectoral Cost-Effectiveness Initial work on CEA was limited to examining mutually exclusive options for the same condition, e.g. chloroquine vs. ACT for first-line malaria treatment. Use of CEA to inform health sector resource allocation emerged in developed and developing countries in early 1990s. Oregon Health Service Commission decided to reduce interventions covered by Medicaid and expand population covered to include near poor. CEA was used to inform choice of interventions. Harvard University Initiative for Global Health

33. HSPR and World Development Report 1993 World Bank through the Disease Control Priorities project and the World Development Report 1993 used CEA of 50+ interventions to develop packages of cost-effective care for low- and middle-income countries. After WDR 93 publication, many developing countries attempted to develop their own national packages and/or implement the WDR93 packages. For example, Mexico adopted an extended package based on this type of analysis. Success of this approach has been limited due to the technical challenge of estimating CEA for many interventions. Harvard University Initiative for Global Health

34. WHO-CHOICE In 1998, to respond to the demand from countries for access to information on intervention cost-effectiveness, WHO launched an ongoing project to make this information available: WHO-CHOICE. WHO-CHOICE has created global guidelines for CEA as well as analytical tools to support analysis of interventions (CostIt, PopMod, McLeague). Harvard University Initiative for Global Health

35. Ex Ante vs. Ex Post CEA Claims of intervention cost-effectiveness undertaken ex ante are often much more attractive than the actual ex post evaluation of costs and effects. Why are ex ante claims more optimistic than what actually happens in many cases? Harvard University Initiative for Global Health