James G. Kahn after Eran Bendavid

1. When Rationality Falters: Limitations and Extensions of Decision Analysis James G. Kahn after Eran Bendavid Decision and Cost-Effectiveness Analysis

2. Overview Decision & cost-effectiveness analysis: Utilitarian & rational decision-making Everyone is equally deserving Alternative (more realistic) assumptions: Behavioral economics Equity 3/12/2009 Decision and Cost-Effectiveness Analysis

3. Mental Accounting • You set off to buy an iPod shuffle at what you believe to be the cheapest store in your neighborhood. When you arrive, you discover that the price of the Shuffle is $75, a price you believe is consistent with low estimates of the retail price. • A friend walks into the store and tells you a store 10 minutes away sells Shuffles for $55. • Do you go to the other store? • Now suppose you are buying a MacBook Pro for $1960, and a friend tells you it sells for $1940 in a store 10 minutes away. Do you go? Decision and Cost-Effectiveness Analysis

4. Normative Problem Formulation • Classical decision theory axioms • Ordering of preference • Transitivity of preference • Quantification of judgment • Comparison of alternatives • It’s the delta that matters • Cost benefit rationale “Risky prospects arecharacterized by their possible outcomes and by the probabilities of these outcomes. The same option, however, can be framed or described in different ways.” -- Tversky & Kahneman, 1981 Decision and Cost-Effectiveness Analysis

5. Framing Effects in Medical Decision-Making: Treatments • When framed positively (i.e. survival vs. mortality): • Respondents 1.5 x more likely to choose surgery over other treatments (i.e. radiotherapy) • Respondents demonstrated increased preference for invasive/toxic treatments • Same framing effect noted in hypothetical & real life treatment decisions • Intervention use intention higher when results presented as RRR vs. ARR or NNT Decision and Cost-Effectiveness Analysis

6. RRR, ARR, and NNT • RRR = Relative Risk Reduction • ARR = Absolute Risk Reduction • NNT = Numbers Needed to Treat Dead Alive Meds 404 921 CABG 350 974 Risk of death (from having CABG) = 350/1324 = 0.264 Relative risk of death = 0.264/0.305 = 0.87 = 87% RRR = Amt of risk of death is reduced by surgery: 100% - 87% = 13% ARR = Absolute amt of risk surgery reduces death: 30.5% - 25.4% = 4.1% NNT = # pts needing surgery to prevent 1 death: 1/ARR = 24 Source: http://www.ebm.worcestervts.co.uk/trial_results.htm Decision and Cost-Effectiveness Analysis

7. Role of equity • Efficiency and Equity • Both important for health care resource allocation decisions • Few guidelines for measuring or incorporating equity • Equity ~ Values • How can equity concerns be incorporated in cost-effectiveness analyses? Decision and Cost-Effectiveness Analysis

8. What is equity? • An equal and fair distribution • Are treatments fairly allocated? Or Are benefits fairly distributed? • No guidance on how to assess Decision and Cost-Effectiveness Analysis

9. Vertical Equity • Principle of vertical equity = allocation linked to “need” • Greater care is given to people with greater health needs • Sicker patients  first priority for funding • Goal is to create equity in eventual health status • Paying attention to equity: • Could make some relatively inefficient technologies more attractive • If benefits groups with greater claim to treatment • Or could make efficient options less attractive Decision and Cost-Effectiveness Analysis

10. Controversy • Vertical equity may be controversial -- if your definition of “need” is different than mine • Assume we accept vertical equity • What characterizes equity? • How should it measured? Decision and Cost-Effectiveness Analysis

11. Are All QALYs Gains Equivalent? 25 Each associated with a gain of 3 QALYs! E ′ 20 E B ′ B 15 A’ Life Expectancy C ′ 10 D ′ 7 QALYs A 5 4 QALYs C D 1 QALY 0 0 0.2 0.4 0.6 0.8 1 Quality of Life Decision and Cost-Effectiveness Analysis

12. Steps in Applying Equity to CEA • Define groups which could receive priority to advance equity • Derive equity weights • Determine how equity weights can be applied to results of cost-effectiveness analyses (CEA) • Apply equity weighting to CEA results as a form of sensitivity analysis Decision and Cost-Effectiveness Analysis

13. Some Possible Equity Factors Decision and Cost-Effectiveness Analysis

14. Steps in Applying Equity to CEA • Define groups which could receive priority to advance equity • Derive equity weights • Determine how equity weights can be applied to results of cost-effectiveness analyses (CEA) • Apply equity weighting to CEA results as a form of sensitivity analysis Decision and Cost-Effectiveness Analysis

15. Survey to Understand Equity • Pilot in elected officials, municipal and provincial public clerks. • Participants recruited from waiting rooms at major Toronto downtown teaching hospital. • Asked to imagine they were voting in a referendum between 2 programs. MS&E 292 - Health Policy Modeling

16. An Example Decision and Cost-Effectiveness Analysis

17. Solve the problem of equity? • Personal circumstances made such decision making challenging. • Several disliked the conceptual basis of the study, • Fairness factors “aren’t measurable” • Trade-offs between attributes too complex • Individual or group values should dominate over centralized decision making Decision and Cost-Effectiveness Analysis

18. Significant factors in equity… • Consistent with prioritization for those with poorer health • Less prior resource allocation viewed as having priority • Equal priority two groups alike except: • 1st had a baseline quality of life that was 50 points worse • 2nd had an expected 10 year increase in life expectancy • Equal priority two groups alike except: • 1st 10 years younger • 2nd had received about $13,000 less in prior resources Decision and Cost-Effectiveness Analysis

19. Some Factors Not Significant • Number of people expected to benefit • Potential improvement in quality of life • Could have important implications for resource allocation models • Distributional aspects (“how many benefit?”) may be less important than the characteristics of individuals (“who benefits?”) Decision and Cost-Effectiveness Analysis

20. Steps in Applying Equity to CEA • Define groups which could receive priority to advance equity • Derive equity weights • Determine how equity weights can be applied to results of cost-effectiveness analyses (CEA) • Apply equity weighting to CEA results as a form of sensitivity analysis Decision and Cost-Effectiveness Analysis

21. Equity-Weighted QALYs: eQALYs • Vertical equity • Implies society values some health gains more than others • For example • A QALY gain a sick person more valuable than a QALY gain for a well person • Cancer drug vs. lifestyle drug • Thus increase or decrease QALYs • QALYs transformed into “eQALYs”= equity-weighted QALYs Decision and Cost-Effectiveness Analysis

22. Limitations of eQALYs • QALYs already controversial • Construct is artificial, somewhat foreign • Measurement issues • Already conflate survival, quality of life • Putting equity in might confuse more than it illuminates • And exacerbate concerns about subjectivity, values • i.e. eQALY components: • Survival Objective • Quality of life (preference) Subjective • Equity weight Subjective and value-laden Decision and Cost-Effectiveness Analysis

23. Steps in Applying Equity to CEA • Define groups which should receive priority to advance equity • Derive equity weights • Determine how equity weights can be applied to results of cost-effectiveness analyses (CEA) • Apply equity weighting to CEA results as a form of sensitivity analysis Decision and Cost-Effectiveness Analysis

24. Final Thoughts • What other issues in behavioral economics? • Endowment – greater value to numerically equivalent loss than gain? • Risk aversion – greater negative value on catastrophe? • Other ideas? • Will this increase influence of CEA? • Anticipate and address reservations … “even if we amplify the loss associated with surgical deaths, surgery still produces the best outcome” • Let’s try … and assess Decision and Cost-Effectiveness Analysis