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PubMed1999

Ratio-based and net benefit-based approaches to health care resource allocation: proofs of optimality and equivalence.

Both incremental cost-effectiveness ratios and net benefits have been proposed as summary measures for use in cost-effectiveness analyses. We present a unifying proof of the optimality and equivalence of ICER- and net benefit-based approaches to the health resource allocation problem, including both 'fixed budget' and 'fixed price' decision rules. If internally consistent willingness-to-pay values are used, ratio- and net benefit-based decision rules identify the same optimal allocation. Because they have identical resource allocation implications, use of one or other of the two approaches must be based on other criteria, such as their behaviour under conditions of uncertainty.

Cost-Benefit Analysis↗

PubMed1999

Bayesian estimation of cost-effectiveness ratios from clinical trials.

Estimation of the incremental cost-effectiveness ratio (ICER) is difficult for several reasons: treatments that decrease both cost and effectiveness and treatments that increase both cost and effectiveness can yield identical values of the ICER; the ICER is a discontinuous function of the mean difference in effectiveness; and the standard estimate of the ICER is a ratio. To address these difficulties, we have developed a Bayesian methodology that involves computing posterior probabilities for the four quadrants and separate interval estimates of ICER for the quadrants of interest. We compute these quantities by simulating draws from the posterior distribution of the cost and effectiveness parameters and tabulating the appropriate posterior probabilities and quantiles. We demonstrate the method by re-analysing three previously published clinical trials.

Bayes Theorem↗

PubMed1999

Sample size and power issues in estimating incremental cost-effectiveness ratios from clinical trials data.

It is becoming increasingly more common for a randomized controlled trial of a new therapy to include a prospective economic evaluation. The advantage of such trial-based cost-effectiveness is that conventional principles of statistical inference can be used to quantify uncertainty in the estimate of the incremental cost-effectiveness ratio (ICER). Numerous articles in the recent literature have outlined and compared various approaches for determining confidence intervals for the ICER. In this paper we address the issue of power and sample size in trial-based cost-effectiveness analysis. Our approach is to determine the required sample size to ensure that the resulting confidence interval is narrow enough to distinguish between two regions in the cost-effectiveness plane: one in which the new therapy is considered to be cost-effective and one in which it is not. As a result, for a given sample size, the cost-effectiveness plane is divided into two regions, separated by an ellipse centred at the origin, such that the sample size is adequate only if the truth lies on or outside the ellipse.

Antineoplastic Agents↗

PubMed1999

At what price significance? The effect of price estimates on statistical inference in economic evaluation.

Because data on resource utilization are now collected in many comparative trials of health interventions, statistical analysis of between-group differences in mean costs has become common. Statistical analyses of costs are generally performed conditional on a set of resource prices (or unit costs), thereby suppressing any uncertainty associated with those price estimates. Results presented here demonstrate that varying price estimates can have a non-negligible effect on statistical inference regarding between-group cost differences. Depending on the relative prices used in an analysis, between-group differences in total costs per patient may be either statistically significant or insignificant, regardless of whether differences in utilization of the underlying resources are statistically significant. These results highlight the importance of recognizing that evaluations based on patient-level economic data may be sensitive to assumptions regarding the values of unobserved variables, such as the relative prices of resources. Traditional methods of sensitivity analysis remain a valuable tool for analysing the implications of uncertainty around estimates of those unobserved variables.

Clinical Trials as Topic↗

PubMed1999

Will the real elasticity of substitution 'in Norwegian dentistry' please stand up?

The non-homothetic production cost structure in Norwegian private dentistry involves more than two factor inputs. Consequently, this paper implements-separately for solo and group practices-three conceptually different measures of factor substitutions to infer the precise nature of input associations using translog cost model estimates based on 1993 data. We calculate own- and cross-price elasticities of factor demands, pairwise elasticities of substitution and their approximate S.E.s. We find that: (1) dentists and dental assistants cannot be consistently aggregated as one homogeneous labour input; (2) input demands are inelastic; (3) the theoretically restrictive Allen-Uzawa and the less restrictive shadow and Morishima elasticities of substitution are not equivalent; (4) dentists and auxiliary dental personnel relate as significant substitutes in solo practices and as significant complements in group practices; (5) 'supplies' (e.g., dental materials) in the aggregate are substitutes for the two types of dentistry labour; and (6) there appears to be a wider scope for factor substitutions in group rather than solo practices. Due to inelastic factor demands, opportunities for cost controls are limited despite some tendencies for factor interchange. Finally, future researchers of production costs involving more than two inputs should investigate the less restrictive, alternative measures of factor substitutions.

Cost Control↗

PubMed1999

Price competition and hospital cost growth in the United States (1989-1994).

In recent years, most health care markets in the United States (US) have experienced rapid penetration by health maintenance organizations (HMOs) and preferred provider organizations (PPOs). During this same period, the US has also experienced slowing health care costs. Using a national database, we demonstrate that HMOs and PPOs have significantly restrained cost growth among hospitals located in competitive hospital markets, but not so in the case of hospitals located in relatively concentrated markets. In relative terms, we estimate that HMOs have contained cost growth more effectively than PPOs.

Economic Competition↗

PubMed1999

Annuitizing the human capital investment costs of health service professionals.

When evaluating initiatives that make innovative uses of staff it is important to consider the long-term cost consequences of training an appropriately qualified workforce. In order to incorporate the costs of qualifying professionals we need both the costs themselves and an appropriate method of annuitizing these costs. This paper focuses on the latter and describes an approach to estimating the expected working life of health service professionals and a method of annuitization that takes into consideration patterns of employment over time. Analyses of the census and Labour Force Survey result in estimates of expected working lives of between 19 and 22 years for nurses and 26 and 29 years for doctors. The implications of different assumptions about the distribution of these years for the equivalent annual cost are identified.

Adult↗

PubMed1999

A Bayesian approach to sensitivity analysis.

Sensitivity analysis has traditionally been applied to decision models to quantify the stability of a preferred alternative to parametric variation. In the health literature, sensitivity measures have traditionally been based upon distance metrics, payoff variations, and probability measures. We advocate a new approach based on information value and argue that such an approach is better suited to address the decision-maker's real concerns. We provide an example comparing conventional sensitivity analysis to one based on information value. This article is a US government work and is in the public domain in the United States.

Bayes Theorem↗

PubMed1999

Estimating uncertainty ranges for costs by the bootstrap procedure combined with probabilistic sensitivity analysis.

When an economic evaluation incorporates patient-level data, there are two types of uncertainty over the results: uncertainty due to variation in the sampled data, and uncertainty over the choice of modelling parameters and assumptions. Previously statistical methods have been used to estimate the extent of the former, and sensitivity analysis to estimate the extent of the latter. Ideally interval estimates for economic variables should reflect both types of uncertainty. This paper describes a method for combining bootstrapping with probabilistic sensitivity analysis to estimate a total 'uncertainty range' for incremental costs. The approach is illustrated using cost data from a randomized controlled trial of endoscopy for Helicobactor pylori negative young dyspeptic patients. The trial failed to demonstrate any clinical benefit from endoscopy, which was on average pound 395 more costly. The combined 95% uncertainty range for incremental costs (-pound 236 to pound 931) was wider than 95% intervals estimated by either probabilistic sensitivity analysis (pound 43 to pound 592) or the non-parametric bootstrap method (-pound 95 to pound 667) alone. The method can easily be extended to the calculation of uncertainty ranges for incremental cost-effectiveness ratios.

Confidence Intervals↗

PubMed1999

Gender, heroin consumption and economic behaviour.

The study examines differences in consumption and economic behaviour among male and female heroin users. A sample of heroin injectors (n = 1834) was interviewed near the needle-exchange service in Oslo and information on consumption, prices, and income was recorded. The consumption pattern of the heroin addicts varies by gender, with females consuming relatively less alcohol and cannabis but significantly more heroin than their male counterparts. The finding of greater heroin consumption among women is surprising. By means of a switching regression model, price and income elasticities for heroin are estimated. Women appear to be more responsive than men to changes in prices. However, the elasticities also differ substantially by dealing status, and non-dealers are more price-responsive than dealers. Non-dealing males emerge with a higher income elasticity compared with their female counterparts, whereas female dealers seem to respond more to changes in income than do male dealers.

Adolescent↗

PubMed1999

Measuring the impact of health insurance with a correction for selection bias--a case study of Ecuador.

This article develops and uses methodologies to evaluate the impact of publicly-financed health insurance programmes on the use of health care. Using univariate and bivariate probit estimation techniques, the study tests and corrects for endogeneity resulting from selection bias. Potential endogeneity arises from the choice to be insured, eligibility for insurance, and differences in individuals' health status. The setting for the study is the country of Ecuador. The General Health Insurance (GHI) programme, which primarily covers workers in the formal sector of the economy, is found to have a strong positive association with the use of curative health care after correcting for selection bias, but no significant effect on the use of preventive care. Individuals with severe illnesses who are eligible for GHI have a preference for private health care, and self-select out of the GHI programme. The Seguro Campesino Social (SSC) programme, directed at farming populations, has positive but insignificant associations with both curative and preventive care.

Ecuador↗

PubMed1999

Competition and supplier-induced demand in a health care system with fixed fees.

The present paper examines whether supplier-induced demand exists for primary physician services in Norway. The research design is adapted to the institutional setting of Norwegian primary physician services, where there is a fixed fee schedule. More than 50% of primary care physicians receive a payment for treatment from the National Insurance Administration on a fee-for-item basis. The results showed that increased competition, measured as a high physician:population ratio, led to a decline in the number of consultations per contract physician. However, the contract physicians in high physician density areas did not compensate for the lack of patients by providing more items of treatment in order to maintain their income. Contract physicians' revenue from items of treatment per consultation were unaffected both by physician density and by the number of consultations per contract physician. These results are further corroborated by data that showed that contract physicians' gross revenue and profits were declining functions of physician density. This paper argues that, from an efficiency point of view, a deregulated health care market with fixed fees may operate well.

Economic Competition↗

PubMed1999

On measuring the hospital cost/quality trade-off.

This paper explores the relationship between cost and quality of hospital care. A total operating cost function is estimated for 137 US Department of Veterans Affairs hospitals for 1988-1993 using three rate-based measures of quality as regressors. The high likelihood of the existence of measurement error in quality in the cross section leads to the application of novel instrumental variable techniques. Results suggest that mortality and readmission indices are adjusted inadequately for illness severity. The measure on the failure to follow up inpatient discharges with outpatient care, however, appears to increase cost. The results of this paper underscore a number of practical difficulties and challenges facing government or other systems in evaluating the relative performance of their hospitals.

Cost Control↗

PubMed1999

Costs of screening for colorectal cancer: an Australian programme.

The total costs (direct and indirect) associated with the operation of an Australian community based screening programme for colorectal cancer (CRC) were estimated. One-year costs of the programme were estimated to be AUS$1 347 948 to screen 24 000 participants. This corresponded to AUS$8868 per polyp and AUS$28 679 per cancer detected. The results presented here are quite favourable compared with the only other Australian screening programme that has reported costs. That programme estimated a cost per cancer detected of AUS$24 233 (adjusted). The recent Australian public health literature has been almost unanimously against recommending the operation of population based CRC screening programmes. More recently, overseas randomized control trials have reported reduced mortality (15 to 33%) as a result of these programmes. Cost data, as presented here combined with the epidemiological evidence, indicate the challenge the Federal Government is now confronted with in formulating policy to control the increasing number of deaths from the disease.

Colorectal Neoplasms↗

PubMed1999

Inferring capitation rates from aggregate health plans' costs.

Setting risk-adjusted capitation rates in health systems with centralized financing and decentralized delivery is one of the most intriguing policy issues. The common practice to set capitation group rates is based on individual data collected from either population surveys or medical records, using a single-and in most cases arbitrary-set of relative unit costs of services. This paper presents a method for estimating group-specific mean costs and capitation rates using a panel of aggregate cost data of the competing health plans and the composition of their populations. This method is used to estimate mean costs and capitation rates for the Israeli health care system. The limited data available severely constrains the range of estimable models, however, the results evoke some questions with regards to reimbursement and rates presently used, as well as to the methodology used to estimate them.

Adolescent↗

PubMed1999

Community rating and choice between traditional health insurance and managed care.

This paper analyses the consequences of allowing a choice between traditional insurance and managed care under community rating. A model of a competitive health insurance market is developed; with the risk equalization scheme being imperfect. There are two types of individuals who are characterized by different costs with respect to traditional insurance. Compared with a situation where traditional insurance is compulsory, allowing choice can make both types better off, can increase the utility of low-cost types at the expense of high-cost types, as well as having no effect. Inefficiencies under compulsory traditional insurance can be eliminated and new inefficiencies can be created. Market equilibria are not necessarily second best.

Choice Behavior↗

PubMed1999

The impact of generic goods in the pharmaceutical industry.

This paper studies the effects of generic drugs in the pharmaceutical industry. Two firms produce two branded goods, with a different active ingredient, and the patent for one of them has expired, so that a generic alternative is in the market. This paper focuses on the case where the branded goods are perfect substitutes and where there exists a degree of differentiation between the branded and the generic goods. The study looks at whether the firm producing the branded good whose patent has expired has incentives to produce its own generic alternative too. For this purpose, the scenario where the firm producing the branded good also produces the generic drug is compared with the situation where the generic good is produced by a third firm. It is found that the firm producing the branded good has incentives to produce its generic alternative, owing to a market segmentation effect. This induces an increase in the price of the branded good produced by this firm, which in turn implies a welfare reduction.

Drug Industry↗

PubMed1999

Health care and economic well-being: estimating equivalence scales for public health care utilization.

Inconsistency between the income concept and the needs associated with its use can yield seriously misleading welfare assessments in comparisons concerning different household types. Equivalence scales are typically estimated from expenditure data that make them compatible with welfare adjustments involving cash income. However, if the welfare analysis extends to economic benefits other than cash income, the equivalence scale must be adjusted to account for needs relevant to the particular form of benefit. This paper derives needs-based equivalence scales for public health care utilization. The scales are estimated from the health care utilization data of different services. In addition, redistributional analysis is used to investigate the effects of adopting various income concepts and allowing for health care needs in the equivalence scale. The results clearly reveal the conceptual importance of accounting for health status, household size and age in welfare comparisons concerning non-cash transfers. It is also shown that the redistributive effect of public health care is heavily dependent upon assumptions made about its scope.

Chronic Disease↗