1. Role of Health Economics in
Public Health
SPEAKER:-Preeti Rai

2. CONTENTS
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What is Health Economics?
What Do Health Economists Do?
Economic evaluation
Cost minimization Analysis (CMA)
Cost-effectiveness Analysis (CEA)
Cost-utility Analysis (CUA)
Cost-benefit Analysis (CBA)
What do the decision makers want to know?
Using Economics in Public Health
Expenditure On Health In India
Economic evaluation at global and national level
Conclusion

3. Economists view of the world…
 Pessimist: bottle ½ empty
 Optimist: bottle ½ full
 Economist: bottle ½ WASTED!!
3

4. The ‘Health Economic’ problem
 Unlimited healthcare
“wants” with rapid growth
in health expenditure.
 Insufficient health sector
resources.
 Choosing between ‘wants’
we can ‘afford’ given our
resource ‘budget’.
4

5. Scarcity of these resources provides the foundation
of economic theory and from this starting point, three
basic questions arise:
• What goods and services shall we produce?
• How shall we produce them?
• Who shall receive them?

6. What is Health Economics?
 Theoretical framework to help healthcare professionals
,decision-makers or governments to make choices on…
…HOW to maximize the health of population given
constrained health producing resources.
 What health economists need is…
 To understand the relationship between resources used and health
outcomes achieved by alternative options.…and compare!
6

7. WHAT DO HEALTH ECONOMISTS DO?
 Health economists are interested in the production of
health at a number of levels. For example:
• What is health and how do we put a value on it?
• What influences health other than health care?
• What influences the demand for health care and health
care seeking behavior?

8. • What influences the supply of health care? (The
behaviour of doctors and health care providers.)
• Alternative ways of production and delivery of
health care.
• Planning, budgeting, and monitoring of health
care.
• Economic evaluation—relating the costs and
benefits of alternative ways of delivering health
care.

9. Economic evaluation is…
 “ The comparative analysis of alternative courses of
action in terms of both their costs and consequences in
order to assist policy decisions” (Drummond et al,1997)
 Economic evaluation is not “choosing the cheapest”.
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10. Stages in economic evaluation
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11. Deciding upon the study
question
 Identifying the problem and aims of evaluation
 What is the problem?
 Why is this problem important?
 What aspects of the problem need to be explained?
 Choosing the alternative options
 Describing the interventions accurately.
 Defining the counterfactual intervention (comparator).
 Defining the audience
 Defining the info needs of the audience.
 Considering how the audience will use the study results.
11

12. Basic types of economic evaluation
 Cost minimization Analysis (CMA)
 Cost-effectiveness Analysis (CEA)
 Cost-utility Analysis (CUA)
 Cost-benefit Analysis (CBA)
12

13. To compare therapy A vs. therapy B
Cost (A)
1
Cost (B)
Outcome (A)
Outcome (B)
Cost (A) - Cost (B)
2
Outcome (A) - Outcome (B)

14. Cost minimization Analysis
 Specific type of analysis in which the outcomes of the 2 (or
more) healthcare interventions are assumed equal.
 Therefore economic evaluation is based solely on comparative
costs.
 Result: least cost alternative.
14

15. Cost-effectiveness Analysis
 In CEA, outcomes are measured in natural or physical units
(e.g. heart attacks avoided, deaths avoided…).
 Only one domain of outcomes can be explored at a time.
 Result: cost per unit of consequence (e.g. cost/LY gained)
15

16. Cost-effectiveness Analysis
 Decision rule:
Two programmes A (comparator) and B.
• If Outcome B = Outcome A => Compare costs (CMA).
• If Outcome B > Outcome A and Cost B < Cost A, B is
dominant.
• If Outcome B > Outcome A and Cost B > Cost A, we have to
make a decision.
 In order to make a decision on which intervention to choose,
a cost-effectiveness ratio (CER) should be calculated.
16

17. Cost-effectiveness Analysis
 The most commonly CERs used are the:
 Average cost-effectiveness ratio (ACER)
ACER=
Cost B
Effectiveness B
 Incremental cost-effectiveness ratio (ICER)
 B− Cost A
Cost
ICER=

Effectiveness B− Effectiveness A
 The next question is : Is the intervention “cost-effective”?
17

18. Cost-effectiveness plane
more costly
B
D
Intervention is more
effective and more
costly(Questionable)
Intervention is less
effective and more
costly(Excluded)
decrease in health effects
increase in health effects
A
C
Intervention is more
effective and less costly (Dominant)
Intervention is less
effective and less
costly(Questionable)
less costly

19.  There are some important features to notice about cost
effectiveness as a method of assessing which is the best use of
resources:
 a) just because something is cost-effective it does not mean you
can afford it
 b) Even if something is cost effective you may need it – e.g.
immunisation with basic EPI vaccines is one of the most cost
effective interventions.
DOTS
 c) The cost effectiveness will vary with the conditions and the
target group concerned.

20. Cost-utility Analysis
 In CUA, the outcomes are measured in healthy years, to
which a value has been attached.
 CUA is multidimensional and incorporates considerations of
quality of life as well as quantity of life using a common unit.
 Result: Cost per unit of consequence (e.g. cost/QALY).
20

21. Cost-benefit Analysis
 CBA try to value the outcomes in monetary terms, so as to
make them commensurate with the costs.
 Result: Net benefit or cost-benefit ratio.
21

23. Summary
Type of Analysis
Costs
Consequences
Result
Cost Minimisation
Money
Identical in all respects.
Least cost alternative.
Money
Different magnitude of a
common measure eg., LY’s
gained, blood pressure
reduction.
Cost per unit of
consequence eg. cost
per LY gained.
Cost Utility
Money
Single or multiple effects
not necessarily common.
Valued as “utility” eg. QALY
Cost per unit of
consequence eg. cost
per QALY.
Cost Benefit
Money
As for CUA but
valued in money.
Net £
cost: benefit ratio.
Cost Effectiveness
23

24.  What do the decision makers want to know?
Is there a health gain?
Is there a cost difference?
What is the relationship between cost and
outcome differences?
Is the cost justified by the benefit (CEA/CUA)?
Is there a net gain (CBA)?
Is this result robust or sensitive to
parameters?

25. Using Economics in Public Health
 Resources are scarce: economists can
provide input as to how to allocate
resources better.
 Economic results can help advocate for
more resources.
 Economic analysis can help design better
policy.

26. Consider that there are two ways to treat the same disease x
and y. If x costs less and leads to more health benefits than y,
the decision will be quite clear. If x costs more than y, but has
more benefits than y, the decision is not as straightforward.
Before we can get to this stage, we have first to assemble and
analyse the evidence.

27. Expenditure On Health In India
 The expenditure on health in India comprises 5.2% of GDP
including public health investment at 0.9% of the GDP.
Countries like Bangladesh and Sub-Saharan Africa spend about
3% of their GDP on health.
 33% of this budget goes to the richest 20% of the population,
whereas the poorest quintile gets only 10% of the money.
 This results in understaffed public health centres with
minimum medicines, poorly maintained equipment and poor
quality of care. This pushes people into the private sector and
there they have to spend their major income on health care.

28.  80% of outpatient care and about 40% to 60% inpatient care is
provided by the private sector. This naturally affects access to
health care, especially for the poor.
 For example, the hospitalisation rate for the poorest quintile is
only about 5 % , whereas for the richest quintile it is about
35% that is practically seven times more.
 So poor people specially have two options, either they spend
their valuable money going to the private sector or remain
without any treatment putting their lives at risk. They sell their
assets and properties to pay the doctors and the hospital.

29. Role of economist in the health sector
 Interested in many of the same areas as other
health professionals
 How can we improve survival, quality of life
and
fairness in access to services
 Economics brings a different framework for
analysing such questions

30.  Does not matter how much we spend on health care, we still
seem not to be able to provide all the health services that are
demanded
 Are we investing in the wrong kinds of health services?
 Are we organizing services so as to best improve the health of
the population?
 Are we investing in technologies that have a low health output
compared with alternative investments?

31.  Because resources are limited, choices have to be made on
how to best allocate these finite resources among investments.
For governments, investment choices have to be made
between alternative public services.
 Examples of investment choices include:
 between malaria prevention and malaria treatment
programmes; or,
 more broadly, between TB, malaria and HIV programmes; or
 even more broadly between education and housing
programmes.

32. IMMUNISATION IN INDIA
 India is a country where 50% of the population do not
receive the six basic vaccines against diphtheria,
whooping cough, tetanus, polio, tuberculosis and
measles. The incremental cost of complete
immunisation with these basic vaccines is less than
$0.75 (30 rupees) per child.
 The push to include expensive new vaccines must be
viewed in this context.
 Any vaccine introduced in developing countries needs
to be weighed in relation to its cost and benefit.

33. ROTAVIRUS
 Mass RIX4414 vaccination in India would probably
prevent substantial morbidity and mortality at a cost
per life year saved below typical thresholds of cost
effectiveness.
 So such a programme in similar settings, should be
weighed up carefully.

34. HIB CONJUGATE VACCINATION
 Hib conjugate vaccination is a cost-effective intervention
in all States of India.
 Although investment in Hib conjugate vaccination would
significantly increase the cost of the Universal
Immunization Program, about 15% of the incremental cost
would be offset by health care cost savings.
 Efforts should be made to speed up the progress for
nationwide introduction of Hib conjugate vaccination in
India.

35. 10 Development Challenges

36. Top solutions – renowned
economists
Solution
Challenge
1
Micronutrient supplements for children (A&zinc)
Malnutrition
2
The Doha development agenda
Trade
3
Micronutrient fortification (iron and salt iodization)
Malnutrition
4
Expanded immunization coverage for children
Diseases
5
Biofortification
Malnutrition
6
Deworming, other nutrition programs in school
Malnutrition
7
Lowering the price of schooling
Education
8
Increase and improve girl’s schooling
Women
9
Community-based nutrition promotion
Malnutrition
10
Provide support for women’s reproductive role
Women
Reference: http://www.copenhagenconsensus.com

37. • Breastfeeding
• Complementary feeding
• Handwashing
3 broad
intervention
groups
• Supplements for children:
Vitamin A, therapeutic Zinc,
multiple micronutrient powders,
deworming
• Supplements for pregnant women:
Iron-folic acid, iodized oil
capsules
• Supplements for general population:
Salt iodization, iron fortification
of staple foods
• Treatment of severe acute malnutrition
• Prevention/treatment of moderate
malnutrition

40. India’s Budgetary Allocation for Health (US$ million) 2001-02 to
2006-07

41. 80
70
60
50
40
30
20
10
0
child
male
female
Ma
li
Ind
ia
Ni
ca
ra
gu
a
Pa
kis
ta n
Ho
nd
ur
as
Eg
yp
t
Bo
liv
ia
Ta
nz
an
Ba
ia
ng
la d
es
h
%
Data for 9 countries: prevalence of anemia

42. Present value of annual losses due to anemia, 9
countries, US $ per capita
6
Loss, US $ per capita
5
4
3
Cognitive loss
Physical loss
2
1
0

43. 35
30
25
20
15
10
5
0
not avertable
avertable
Ma
li
Ind
Ni
c a ia
ra
gu
a
Pa
kis
Ho ta n
nd
ur
as
Eg
yp
t
Bo
liv
ia
Ta
nz
an
Ba
ia
ng
la d
es
h
US $/capita
PV of losses due to anemia potentially avertable by
fortification

44. Cost-benefit of iron interventions
 Benefit:cost ratio ranges from 3:1 to 10:1 for
physical productivity alone (median 6:1)
 Ratio ranges from 3.8:1 to 14:1 (median 8.7:1) when
including cognitive effects
 I.e., provided that assumptions are appropriate, iron
interventions should be very high priority

45. Economic impact of tuberculosis in india
 Due to work loss and debts TB cost Rs 12,000 crore
annually
 And 3Lakh school dropouts due to parental TB .The
cost to the patient for diagnosis and succesfull
treatment averages US doller 100-150, more than half
of annual income of daily wage laborer.

46. Problem In Indian health economy
 In light of the fact that India still has one of the highest levels
of child and maternal deaths all over the world, public health
expenditure in India is grossly inadequate.
 Besides the low level of government allocation and spending
on health, under-utilisation of available funds suggests that
the problem is deeply systemic.
 Some of such systemic weaknesses that constrain fund
utilisation under NRHM –a programme with huge potential to
transform health care delivery in India.
 These include
 distorted fund allocation (both across states and
components);
 inadequate capacity among health societies to prepare and
cost out health plans;
 unnecessary delays in fund transfers from one level of the
bureaucracy to another;
 and acute shortages in infrastructure and medical staff, both
of which impede sustained, quality delivery of health services.

47. CONCLUSION
 For now it is probably safe to conclude that the 'gold standard' type of economic
evaluation is either cost-utility analysis or cost-benefit analysis, and that there remains
important debate within the health economics profession regarding which is more
appropriate to the analysis of public health interventions.
 Difficult choices in health care are inevitable and there is an increasing emphasis on
making decisions explicit and fair.
 Health economics suffers from a number of methodological limitations but it can offer
us useful concepts and principles which help us think more clearly about the
implications of resource decisions we make.
 Health economics should be made an integral part of the health management right
from the peripheral level to intermediary and apex referral hospitals. Health
administrators, doctors and other health personnel should be oriented to this new
discipline.
 Thie can be achieved by including and emphasising 'health economies' in
undergraduate and postgraduate medical curriculum. Refresher courses for the health
administrators in health economics would also be of considerable help.

48. REFRENCES
1.
Baltussen, K. Floyd and C. Dye, (2005) “Cost effectiveness analysis of strategies
for tuberculosis control in developing countries,” British Medical
Journal, 331;1364, (originally published online 10 Nov 2005;
doi:10.1136/bmj.38645.660093.68)
2.
D. R. Hogan, R. Baltussen, C. Hayashi, J. A. Lauer, J. A. Salomon, (2005) “Cost
effectiveness analysis of strategies to combat HIV/AIDS in developing countries,”
British Medical Journal, doi:10.1136/bmj.38643.368692.68 (published 10 November
2005)
3.
C. A. Goodman, P. G. Coleman, A. J. Mills, (1999) “Cost-effectiveness of malaria
control in sub-Saharan Africa” The Lancet, vol. 354, 378-85, July.
4.
Drummond M. Economic analysis alongside control trials. London: Department of
Health, March 1994.
5.
Kernick D. Costing principles in primary care. Fam Pract 2000;17:1766–70.
6.
Torgerson DJ, Spencer A. Marginal costs and benefits. BMJ 1996;312:35–6.

49. Thank you