Measurement & Valuation of Health

1. Measurement & Valuation of Health • What is ‘health’? • Why do we need to measure it? • How can it be measured? • Why do we need to value it? • How can it be valued? HEA PTP: M207 Health Economics 1

2. What is health? • Good health is…not bad health • ‘Absence of disease’ • Good health is…a positive thing • ‘Total physical and mental well-being’ • Good health is…two-dimensional • ‘A long life and a happy life’ • Good health is…multidimensional • ‘A long life plus an ability to do all the things that one wants to do’ • Good health is a …subjective concept • ‘What makes me happy is not the same thing that makes you happy’ • ‘What made me happy yesterday is not the same thing that makes me happy today HEA PTP: M207 Health Economics 2

3. Why measure health? • ‘Health’ is the ‘product’ of health care • not ops performed, no patients treated etc • Clinical reasons - effectiveness • Economic reasons - efficiency HEA PTP: M207 Health Economics 3

4. Length of life • Mortality (numbers, rates, SMRs) • Life expectancy • Life years lost • Quality of life • Numerous QoL measures (generic and specific) • SF-36, Nottingham Health Profile, Guttman Scale, Rotterdam Symptom Checklist, Hospital anxiety and depression scale etc…. HEA PTP: M207 Health Economics 4

5. Limitations of measurements/need for valuation • Confines response to questions posed - may not incorporate all relevant aspects of health • Multitude of instruments - compatibility? • Ambiguity in assessing overall improvement of detriment in health • Efficiency - value of benefits > value (opp) cost HEA PTP: M207 Health Economics 5

6. Valuation versus Measurement • Value is determined by benefits sacrificed elsewhere • Valuation requires wade-off benefits • measurement does not HEA PTP: M207 Health Economics 6

7. Methods of valuing health • ‘Utility or prefoeuce assessment eg QALYS • Monetary terms eg WTP HEA PTP: M207 Health Economics 7

8. QUALITY ADJUSTED LIFE YEARS(QALYS) Adjusts data on quantity of life years saved to reflect a valuation of the quality of those years If healthy: QALY = 1 If unhealthy: QALY < 2 HEA PTP: M207 Health Economics 8

9. QL Weighting HEA PTP: M207 Health Economics 9

10. QALY PROCEDURE • Identify possible health states - cover all important and relevant dimensions of QoL • Derive ‘weights’ for each state • Multiply life years (spent in each state) by ‘weight’ for that state HEA PTP: M207 Health Economics 10

11. “UTILITY” WEIGHT Utility = satisfaction/well-being - reflects a consumers preferences Utility weights are necessarily subjective - they elicit an individual’s preferences for, or value of, one or more health states. Must: 1. Have interval properties 2. Be ‘anchored’ at death and ‘good health’ HEA PTP: M207 Health Economics 11

12. TECHNIQUES FOR MEASURING “UTILITY” Variety of techniques available, including: • Time Trade off • Person Trade Off • Standard Gamble • Magnitude Estimation • Rating Scale HEA PTP: M207 Health Economics 12

13. OBTAINING “UTILITY” WEIGHTS Two means of obtaining “utility” weights: 1. Evaluation specific/’holistic’ measures - develop evaluation specific (‘holistic’) description of health state and then derive weight for that specific state directly by population survey 2. Use ‘generic’ or ‘multi-attribute’ instruments - use predetermined weights, based on combination of dimensions of health yeilding a finite number of health states/values HEA PTP: M207 Health Economics 13

14. EVALUATION SPECIFIC/’HOLISTIC’ MEASURE Advantages: 1. Sensitive 2. Account for wider QoL factors (eg process utility, duration/prognosis) Disadvantages 1. Cost and time intensive 2. Lack of comparability HEA PTP: M207 Health Economics 14

15. GENERIC (MAU) INSTRUMENTS Advantage: 1. Supply weights “off the shelf” Disadvantages: 1. Insensitive to small changes in health 2. Dimensions may not be sufficiently comprehensive 3. Weights may not be transferable across groups HEA PTP: M207 Health Economics 15

16. SOME OTHER ISSUES • Choosing respondents for utility estimation - whose values count • What constitutes a ‘correct’ health state description? • What is the appropriate ‘measurement’ technique? • Aggregation of values? • Biases - against, life enhancing versus life-saving etc. HEA PTP: M207 Health Economics 16

17. Why Monetary Valuation? • Assessment of allocative efficiency ie positive Net Present Value (NPV) • Valuation of non-health benefits eg process, information, convenience • Valuation of non-use benefits ie externalivies, orphan value HEA PTP: M207 Health Economics 17

18. Methods of Monetary Valuation • Court awards (death/injury) • Political process/implicit public sector awards • Life insurance • ‘Human capital - value of production • Observed wealth - risk trade-off • Direct survey HEA PTP: M207 Health Economics 18

19. Human Capital Approach Benefits = gains in productive output (due to ill health) Valuation Basis = earnings / wage data Issues = discriminatory value based on researcher not value based on economic theory HEA PTP: M207 Health Economics 19

20. ‘Willingness to Pay’ Approach Benefits = what someone is willing to give up (pay) to have the commodity Valuation basis = money represents a claim on benefits from consumption of other commodities = individual preference HEA PTP: M207 Health Economics 20

21. Means of Estimating WTP HEA PTP: M207 Health Economics 21