Health economics model development and evaluation
Micro-economic evaluation at treatment level
A large focus of health economics, particularly in the UK, is the microeconomic evaluation of individual treatments. In the UK, the National Institute for Health and Clinical Excellence (NICE) appraises certain new and existing pharmaceuticals and devices using economic evaluation.
Economic evaluation is the comparison of two or more alternative courses of action in terms of both their costs and consequences (Drummond et al.). Economists usually distinguish several types of economic evaluation, differing in how consequences are measured:
* Cost minimisation analysis
* Cost benefit analysis
* Cost-effectiveness analysis
* Cost-utility analysis
In cost minimisation analysis (CMA), the effectiveness of the comparators in question must be proven to be equivalent. The 'cost-effective' comparator is simply the one which costs less (as it achieves the same outcome). In cost-benefit analysis (CBA), costs and benefits are both valued in cash terms. Cost effectiveness analysis (CEA) measures outcomes in 'natural units', such as mmHg, symptom free days, life years gained. Finally cost-utility analysis (CUA) measures outcomes in a composite metric of both length and quality of life, the Quality Adjusted Life Year (QALY). (Note there is some international variation in the precise definitions of each type of analysis).
A final approach which is sometimes classed an economic evaluation is a cost of illness study. This is not a true economic evaluation as it does not compare the costs and outcomes of alternative courses of action. Instead, it attempts to measure all the costs associated with a particular disease or condition. These will include direct costs (where money actually changes hands, e.g. health service use, patient co-payments and out of pocket expenses), indirect costs (the value of lost productivity from time off work due to illness), and intangible costs (the 'disvalue' to an individual of pain and suffering). (Note specific definitions in health economics may vary slightly from other branches of economics.)
Health care markets
The five health markets typically analyzed are:
* Healthcare financing market
* Physician and nurses services market
* Institutional services market
* Input factors market
* Professional education market
Although assumptions of textbook models of economic markets apply reasonably well to health care markets, there are important deviations. Insurance markets rely on risk pools, in which relatively healthy enrollees subsidize the care of the rest. Insurers must cope with "adverse selection" which occurs when they are unable to fully predict the medical expenses of enrollees; adverse selection can destroy the risk pool. Features of insurance markets, such as group purchases and preexisting condition exclusions are meant to cope with adverse selection.
Insured patients are naturally less concerned about health care costs than they would if they paid the full price of care. The resulting "moral hazard" drives up costs, as shown by the famous RAND Health Insurance Experiment. Insurers use several techniques to limit the costs of moral hazard, including imposing copayments on patients and limiting physician incentives to provide costly care. Insurers often compete by their choice of service offerings, cost sharing requirements, and limitations on physicians.
Consumers in health care markets often suffer from a lack of adequate information about what services they need to buy and which providers offer the best value proposition. Health economists have documented a problem with "supplier induced demand", whereby providers base treatment recommendations on economic, rather than medical criteria. Researchers have also documented substantial "practice variations", whereby the treatment a patient receives depends as much on which doctor they visit as it does on their condition. Both private insurers and government payers use a variety of controls on service availability to rein in inducement and practice variations.
The U.S. health care market has relied extensively on competition to control costs and improve quality. Critics question whether problems with adverse selection, moral hazard, information asymmetries, demand inducement, and practice variations can be addressed by private markets. Competition has fostered reductions in prices, but consolidation by providers and, to a lesser extent, insurers, has tempered this effect.
(Wikipedia: The Free Encyclopedia)