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Cost-Effectiveness & Resource Allocation

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  1. Cost-Effectiveness &Resource Allocation Wisconsin Public Health and Health Policy Institute May 26, 2005

  2. For consideration… • How should the health policy community balance competing priorities of: • Maximizing health • Minimizing budget • Should prevention be thought of differently from other types of health care? • What is the role for the public in this discussion?

  3. Life Expectancy at Birth

  4. Infant Mortality Rates Infant Mortality Rates (per 1,000 Live Births) By OECD Country in 2000

  5. Percentage of GDP Spent on Health Care in 1990 and 2000

  6. Reasons for Changes in Medical Care Spending 1987-2000. Thorpe, K et al, . Health Affairs, 2004 Percent change in spending attributable to: Increase cost/ Rise in treated Increased treated case prevalence population Disease and $s(in billions)

  7. Cost-Effectiveness Analysis (aka…..value for money)

  8. Costs Costs include: Care by health professionals Labs and X-Rays Hospital/facility charges Medications Other expenses related to illness

  9. Effectiveness in Cost-Effectiveness Analysis • An effective treatment or intervention does one or both of the following: • Increase how long people live • Improve or maintain how well people feel

  10. Quality-adjusted life years:A measure of effectiveness (Life expectancy) (quality of life)=QALYs

  11. Health-related Quality of Life 1 0 Dead Perfect health

  12. Calculations:Quality-Adjusted Life Years If, HRQL= 0.7 And, A treatment gives 10 extra years of life (@ 0.7 per year) Then…. People receiving the treatment gain Seven Quality-Adjusted Life Years (7 QALYs)

  13. A QALY is a QALY is a QALY #People HRQL LE = QALYs Saves 100 x 0.8 x50 = 4000 Lives Improves 10,000 x0.1x 4 = 4000 HRQL

  14. The cost-effectiveness of one thing compared to another… Cost treatment A – Cost treatment B Effectiveness treatment A – Effectiveness treatment B = COST per QALY

  15. For example… CostLife ExpectancyHRQLQALYS Group A$80,000 2 Years X .6 =1.2 Group B$ 4,000 1 Year X .8 = 0.8 Cost-effectiveness: $80,000 - $4,000 = $76,000 =$190,000/QALY 1.2 – 0.8 0.4

  16. What’s a “Good” Buy? “Expensive” more than 100K/QALY “Reasonable” 50K/QALY “Very Efficient” less than 25K/QALY

  17. Cost-Effectiveness AnalysisSome Questions….. • Should “life-saving” be placed on the same mathematical scale as “quality improving”? • Is it appropriate to consider cost per QALY when diseases are immediately life-threatening? • How would we justify discriminating against people who have diseases that are “inefficient” to treat? • Should QALYs count the same regardless of whether they go to young or old? • The not so sick, versus the very sick? • When prevention is as “cost-effective” as cure, which gets priority?

  18. Condition/Treatment Cost per QALY Treatment for Erectile Dysfunction $6,400/QALY *Physician Counseling for Smoking $7,200/QALY Total Hip Replacement $9,900/QALY *Outreach for Flu and Pneumonia $13,000/QALY Treatment of Major Depression $20,000/QALY Gastric Bypass Surgery $20,000/QALY Treatment for Osteoporosis $38,000/QALY *Screening For Colon Cancer $40,000/QALY Implantable Cardioverter Defibrillator $75,000/QALY Lung-Volume Reduction Surgery $98,000/QALY Tight Control of Diabetes $154,000/QALY *Treating Elevated Cholesterol ( + 1 risk factor) $200,000/QALY Resuscitation After Cardiac Arrest $270,000/QALY Left Ventricular Assist Device $900,000/QALY COST/QALY: Selected Medicare Services

  19. For consideration… • Should prevention be thought of differently from other types of health care?

  20. Condition/Treatment Cost per QALY Cost per person Number of people to treat TOTAL COST Erectile Dysfunction $6,400/QALY $480 5 million 3 billion Physician Counseling for Smoking $7,200/QALY $128 4 million 0.5 billion Total Hip Replacement $9,900/QALY $31,000 250,000 7 billion Outreach for Flu and Pneumonia $13,000/QALY $17.50 20 million 0.35 billion Major Depression $20,000/QALY $2,000 2 million 4 billion Gastric Bypass Surgery $20,000/QALY $81,000 70,000 6 billion Treatment for Osteoporosis $38,000/QALY $950 5 million 5 billion Screening For Colon Cancer $40,000/QALY $350 8.4 million 3 billion Implantable Cardioverter Defibrillator $75,000/QALY $35,000 50,000 1.75 billion Lung-Volume Reduction Surgery $98,000/QALY $50,000 20,000 1 billion Tight Control of Diabetes $154,000/QALY $1400 4.8 million 7 billion Elevated Cholesterol $200,000/QALY $1350 8 million 11 billion Resuscitation After Cardiac Arrest $270,000/QALY $45,000 130,000 6 billion Left Ventricular Assist Device $900,000/QALY $100,000 100,000 10 billion Estimated costs of treating selected conditions. Gold, et al, 2005 (unpublished)

  21. SUNDAYBUSINESS February 27, 2005, Sunday ECONOMIC VIEW: How to Save Medicare? Die SoonerBy DANIEL ALTMAN (NYT) 1103 words Late Edition - Final , Section 3 , Page 1 , Column 5

  22. We are such stuff as dreams are made on, and our little life is rounded with a sleep… The Tempest Shakespeare, W. et al

  23. For consideration… • What is the role for the public in this discussion?

  24. Health, Defense and Education %of GDP 3.6