1.1 overview of course and basic principles (t)

Craig Mitton & Francois Dionne | Priority Setting & Resource Allocation | 1

Overview of workshop and basic principles


Spending on health care in Canada

•$170 B in total health care spending in 2008

•on average about $5170 per person

• Canada ranked in top 5 of OECD countries

• 30% after inflation increase since 1993

• Greatest increases in drugs

• $37 billion in spent in 1984

• translates to 10.7% of GDP and in many provinces over 40% of provincial expenditure


What are we getting for this spending?

•90% of people who used the system in 2007 rated the overall quality of the care they received as good or better

•88% of Canadians rate their personal health as good or very good

•2008 OECD health database


Yet, there are issues

•Allocation of health care funds according to defined populations is a global phenomenon

•Basic notion within health authorities is that of a limited funding envelope

• Not enough resources to meet all needs

•Also, 72% of Canadians believe our system requires either fundamental change or a complete overhaul


In summary•Some issues with our healthcare system:

widespread perception amongst decision makers that there are not enough resources and amongst the public that major changes are needed

•Those two issues relate directly to resource allocation and priority setting i.e. there are issues with resource allocation and priority setting


The goal in resource allocation

•Decision-makers need to determine:

• what health care services to provide

• for whom to provide services

• how to provide services

• where services should be provided

… in order to meet local and/ or system level objectives including access, health gain…


How is that typically done?•Resource allocation based on:

•Historical patterns with incremental adjustment

•Politics and the ‘squeaky wheel’

•Needs assessment

•Core services

•economic evaluation (limited)


Historical allocation

•Funding based on last year’s budget with some adjustments

•No mechanism for maximizing benefit

•Continual growth in regional budgets

•Process for funding new proposals unclear

•Safe, can take less time


Politics and the ‘squeaky wheel’

•Typically guides the ‘adjustments’ associated with the historical approach


Needs assessment (1)• Define need and measure the met and unmet needs of a given population

• Common approach for setting priorities

• Useful in highlighting gap but not for priority setting

• ‘Need’ itself is value laden and will change as resource availability changes

• If unmet need, then allocate resource that way

• May not be enough resources… opportunity cost

• Costs and benefits often not considered in tandem


Needs assessment (2)

•Epidemiological needs assessment with diseases ranked based on prevalence

• Effectiveness of interventions not considered

• Implies that services must be provided to meet all needs but fails to recognize scarcity


Core Services•Define a set of core services and only publicly fund

those services on the list

• New Zealand & Netherlands but problems in practice: what is ‘medically necessary’?

• Items ‘out’ may provide more benefit per dollar spent for some patients then other ‘in’ items

• As those that are ‘out’ are out, cannot shift resources from the ‘in’ items to the ‘out’ items… maximizing benefit overall unlikely due to margin being ignored


Economic evaluation (1)

•Comparison of two or more interventions or services on the basis of costs and benefits

•Cost-effectiveness, cost-utility, cost-benefit

•Opportunity cost: benefit gained from one service more or less than benefit from alternative uses of resources

•Benefit: life years gained, QALYs, common currency


Economic Evaluation (2)

•Important tool but rarely provides the answer• Other criteria in decision-making

•Time and cost of studies… feasibility issue

•Incremental cost-effectiveness ratio (ICER)• Low cost per unit of benefit ‘cost effective’

• Incremental resources required, budget impacted elsewhere, opportunity costs ignored


QALY league tables•Ranking procedures based on marginal cost per

QALY gained (Oregon model)

•To produce more QALYs, items higher on list done in lieu of lower items

• Assumptions underlying ratios not considered

• Is QALY maximization really the end goal?

• List based approach: opportunity cost and the margin again ignored


How do decision makers feel about these methods?

•Surveys in various countries have reported feelings of unease around priority setting

• United Kingdom (late 1990s)

• Australia (2003)

• Canada (late 1990s, 2004, 2005)

• Often ad hoc and inconsistent approaches

• Concerns about fairness and stakeholder impact


A pragmatic decision-making approach that….– Aligns resources strategically with system goals and community

needs – Leads to publicly defensible decisions based on available evidence

and community values– Facilitates stakeholder engagement around improving benefit with

limited resources– Supports the public accountability of health care decision-makers

How do we move in this direction? This is what this workshop is about

What is Required?


Workshop overview- key areas covered

• Key principles underpinning a pragmatic approach to resource allocation decision-making

• How to address values in the context of priority setting

• Methods for priority setting- specifically Program Budgeting and Marginal Analysis (PBMA)

• Economic evaluation

• Success factors

• Case studies


Learning objectives• Knowledge on commonly used approaches to priority

setting by health care decision makers both within Canada and elsewhere

• Practical steps for resource allocation priority setting, including generating and applying decision making criteria, based on the implementation of PBMA

• Understanding how economic evaluation can be used alongside of other types of evidence to inform real world health care priority setting


Learning objectives (2)

• Knowledge of individual and organizational success factors related to improving priority setting and resource allocation practices

• Basics of designing a process for resource allocation priority setting in a health organization

Health & Medicine

1.1 overview of course and basic principles (t)