IntroductionIntroduction Economics provides a logical, internally Economics provides a logical, internally

consistent paradigm for motivating public consistent paradigm for motivating public health decision making and evaluating the health decision making and evaluating the outcomesoutcomes..

Economics evaluation considers the value of Economics evaluation considers the value of the quantity of outcomes produced rather the quantity of outcomes produced rather than distributions of outcomesthan distributions of outcomes..

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EconomicsEconomics in public health is the in public health is the

study of how scarce resources are allocated study of how scarce resources are allocated

and how to use it to achieve maximum and how to use it to achieve maximum

benefit.benefit.

In public health resources might be In public health resources might be

allocated to produce public health supplies allocated to produce public health supplies

and equipments that is used by nurses or and equipments that is used by nurses or

services for clients like home visits.services for clients like home visits.

Clients use resources when adopting or Clients use resources when adopting or

changing health behavior or using medical changing health behavior or using medical

carecare treatment outcomes.treatment outcomes.

Allocation of scarce Allocation of scarce resources :resources :Individuals and organizations allocating Individuals and organizations allocating scarce resources are making choices. Thus, scarce resources are making choices. Thus, economics is fundamentally about the economics is fundamentally about the choices that are made about the production choices that are made about the production and consumption of goods and services.and consumption of goods and services.

Economic evaluation:Economic evaluation:There are several methods used in There are several methods used in economic analysis. Such aseconomic analysis. Such asCost analysisCost analysisCost-effectiveness analysisCost-effectiveness analysisCost Benefit analysisCost Benefit analysis

Cost analysis:Cost analysis: It refers to any evaluation that uses the It refers to any evaluation that uses the

structured collection of costs without structured collection of costs without

regard to evaluating health benefits or regard to evaluating health benefits or

outcomes. outcomes.

Costs are frequently categorized into Costs are frequently categorized into

directdirect costs, costs, indirectindirect costs and costs and

iintangiblentangible costs. costs.

•Direct and indirect costsDirect and indirect costs can can

be subcategorized into medical and be subcategorized into medical and

nonmedically related costs. nonmedically related costs.

. .

•Direct medical costsDirect medical costs represent represent the value of the resources used specifically the value of the resources used specifically for the health care services or intervention for the health care services or intervention being measured. These frequently include being measured. These frequently include all medical services, diagnostics testing and all medical services, diagnostics testing and treatment including medicationstreatment including medications

•Direct non medical costsDirect non medical costs can can include necessary expenses that aren't include necessary expenses that aren't health care relates. These costs may include health care relates. These costs may include patient transportation costs.patient transportation costs.

•Indirect costsIndirect costs attempt to measure attempt to measure the economic value of resources that are the economic value of resources that are lost as a result of contracting an illness or lost as a result of contracting an illness or participating in an intervention. participating in an intervention.

Commonly, indirect costs are measured as Commonly, indirect costs are measured as the value of lost wages or the value of lost the value of lost wages or the value of lost leisure time. leisure time.

•Intangible costsIntangible costs attempt to attempt to quantify costs associated with the pain or quantify costs associated with the pain or suffering associated with disease or its suffering associated with disease or its treatment.treatment.

Intangible costsIntangible costs are extremely are extremely difficult to measure and thus are rarely difficult to measure and thus are rarely included in many economic analysis. included in many economic analysis.

Cost – Effectiveness analysisCost – Effectiveness analysis• It compares the costs of intervention with It compares the costs of intervention with

benefits that result from that intervention. CEA benefits that result from that intervention. CEA aggregates all appropriate costs for one or more aggregates all appropriate costs for one or more health care interventions and express them in health care interventions and express them in terms of health outcomes in their natural ( non terms of health outcomes in their natural ( non monetary ) unit.monetary ) unit.

• CEA is similar to cost benefit analysis except CEA is similar to cost benefit analysis except that it is not accepted that outcomes will be that it is not accepted that outcomes will be valued in monetary terms.valued in monetary terms.

• Results of CEA are commonly reported as two Results of CEA are commonly reported as two types of ratios, the average cost-effectiveness types of ratios, the average cost-effectiveness ratio and the incremental cost- effectiveness ratio and the incremental cost- effectiveness ratio (ICER). ratio (ICER).

•The average cost effectiveness ratio is the The average cost effectiveness ratio is the

appropriate measure when there are no appropriate measure when there are no

comparisons between interventions, and comparisons between interventions, and

the ratio becomes a simple description of the ratio becomes a simple description of

the cost per outcome for a single the cost per outcome for a single

intervention or treatment. ICER used in the intervention or treatment. ICER used in the

situation where two or more interventions situation where two or more interventions

are being compared. are being compared. For example:For example:Comparing two interventions (A and B) Comparing two interventions (A and B)

assuming intervention B is more expensive, assuming intervention B is more expensive,

the ICER for this comparison can be the ICER for this comparison can be

expressed as:expressed as:

ICER= Total cost (B) – Total cost (A)ICER= Total cost (B) – Total cost (A)

Health outcome (B) – Health Health outcome (B) – Health

outcome (A)outcome (A)

•CEA results present decision makers with CEA results present decision makers with

quantifiable trade-offs between costs and quantifiable trade-offs between costs and

the heath effects of the intervention being the heath effects of the intervention being

compared. compared.

•This technique can be used for final health This technique can be used for final health

outcomes (e.g., patients survived or Lives outcomes (e.g., patients survived or Lives

saved). And can also be used for saved). And can also be used for

intermediate outcome (e.g., number of intermediate outcome (e.g., number of

patients quit smoking)patients quit smoking)

• Intermediate health outcomes should be Intermediate health outcomes should be

linked to final health outcomes to be most linked to final health outcomes to be most

useful (e.g., measuring patients who quit useful (e.g., measuring patients who quit

smoking can be directly linked to lung smoking can be directly linked to lung

cancer cases prevented).)cancer cases prevented).)

Cost - Benefit AnalysisCost - Benefit Analysis• CBA compare the costs of an intervention CBA compare the costs of an intervention

with dollar value of benefits.with dollar value of benefits.

• CBA is an economic analysis in which both CBA is an economic analysis in which both

the costs and health outcomes are the costs and health outcomes are

expressed in terms of a net benefit expressed in terms of a net benefit

representing the difference between all representing the difference between all

input ( costs) and all outcomes ( both input ( costs) and all outcomes ( both

positive and negative health positive and negative health

consequences).consequences).

•These analyses are designed to place a These analyses are designed to place a

monetary value on all resources being used monetary value on all resources being used

in an intervention or to implement a policy. in an intervention or to implement a policy.

They also place a dollar value on all They also place a dollar value on all

outcomes of an intervention or policy outcomes of an intervention or policy

change. In health care, sometimes these change. In health care, sometimes these

analyses are disliked because they require analyses are disliked because they require

time preferences for health status and time preferences for health status and

attempt to place dollar value on lifeattempt to place dollar value on life

•CBA often used in environmental health, It CBA often used in environmental health, It

also can be used to evaluate policy also can be used to evaluate policy

changes, community level interventions or changes, community level interventions or

individual treatment.individual treatment.