HEA PTP: M207 Health Economics 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?

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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

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Why measure health?

‘Health’ is the ‘product’ of health care• not ops performed, no patients treated etc

Clinical reasons - effectiveness

Economic reasons - efficiency

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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….

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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

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Valuation versus Measurement

Value is determined by benefits sacrificed elsewhere

Valuation requires wade-off benefits• measurement does not

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Methods of valuing health

‘Utility or prefoeuce assessment eg QALYS

Monetary terms eg WTP

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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

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QL Weighting

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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

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“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’

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TECHNIQUES FOR MEASURING “UTILITY”

Variety of techniques available, including:

Time Trade off

Person Trade Off

Standard Gamble

Magnitude Estimation

Rating Scale

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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

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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

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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

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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.

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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

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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

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Human Capital Approach

Benefits = gains in productive output

(due to ill health)

Valuation Basis = earnings / wage data

Issues = discriminatoryvalue based on researchernot value based on economictheory

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‘Willingness to Pay’ Approach

Benefits = what someone is willing togive up (pay) to have the

commodity

Valuation basis = money represents a claimon benefits from consumptionof other commodities

= individual preference

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Means of Estimating WTP

Advantages Disadvantages

“Implicit”or“Revealed”preference

Real preferences Difficult to isolatevalue of benefitconfounders

“Contingent”or “Survey”valuation

Direct valuation ofbenefit of good

Hypotheticalmarket “Surveyproblems”