can current decision rules provide a useful guide? Karl Claxton - - PowerPoint PPT Presentation

The complexity of the allocation problem in health care: can current decision rules provide a useful guide?

Karl Claxton

Questions of fact and questions of value?

• When costs displace health (∆ch)
• When costs displace consumption (∆cc)

Fact : k = how much health displaced by increased HCS costs? Value: v = how much consumption should we give up for health?

h c

c c h k v      

Health gained Health forgone Consumption forgone

h c

c c h k v      

Health forgone Consumption forgone

h c

c c h k v      

• Costs fall on both

.

0,

h h

c v v h c

• r

k k h       

.

0,

c c

c v h c

• r

v h       

h c

k c c v k h      . 0,

h c

v v h c c

• r

k      

Question of value

• Specify a complete and legitimate SWF?

– v is the measure of social welfare and presupposes a complete SWF

• Health and consumption are the only arguments
• or separable from other arguments

– k is simply an inefficient nuisance preventing welfare maximisation

• Complete and legitimate specification of SW not possible?

– Trade-offs still need to be and are made – Legitimate social process reveals something about a latent welfare function – Interpret shadow prices as revealed but partial expression of social value

• k is a revealed expression of social value of health from collective health care
• v is how much of their consumption individuals are willing to give up to improve

their own health

– So good reasons why k ≠ v – Good reasons to suppose there are other non separable arguments

Claxton et al, 2010 , 2011 and Paulden 2011

Health Budget

What it is and what its not

H1 B1 1/k1

Current NHS An efficient NHS

1/k1 Underestimate health effect of ∆B (i.e., k1 is too high) Average productivity would

• verestimate health effect of ∆B

(i.e., H1/B1 < k1)

A scientific question of fact

• Previously

– Variations in expenditure and outcomes within programmes – Reflect what actually happens in the NHS by PBC

• Need estimate the overall threshold:

– How changes in overall expenditure gets allocated across all the programmes – How changes in mortality might translate into QALYs gained – More (all) programmes (types of QALYs displaced) – How uncertain is any overall estimate – How it changes with scale of expenditure change – How it changes over time

Cancer Circulation Respiratory Gastro-int 04/05 per LY £13,137 £7,979 05/06 per LY £13,931 £8,426 £7,397 £18,999

Martin et al 2008, 2009 and MRC/NIHR 2012

Budgetary policies and available actions

• Hard constraints with uncertain and variable costs and outcomes

– Corner solutions or exogenous parameters

• Model budget, policy, information revealed and available actions

– Current rules special case of soft constraint – No simple ex-ante rules – more cost-effective if hard constraint

• not meet budget at expectation or maximise expected health outcomes

5000 5200 5400 5600 5800 6000 6200 6400 6600 6800 15 16 17 18 19 20 21 22 23 24 25

Budget (£ million) Expected total health benefits

Soft budget constraint Hard budget constraint Complete flexibility Restrictive action 4200 4300 4400 4500 4600 4700 4800 4900 5000 9 10 11 12 13 14 15 16 17 18

Notional budget (£ million), actual budget = £12m Expected total health benefits

Chalabi et al 2008, and McKenna et al 2010

Implications for the value of research

• How much budget give up to resolve uncertainty?

– Underestimate value (hard constraints and less available actions) – Overestimate (soft constraint)

• EVI based on current decision rules are a special case

– Soft constraint and buy as much health as you like at a constant rate (k)

• Variability and uncertainty matters

– Approval and research decisions

£0 £1,000,000 £2,000,000 £3,000,000 £4,000,000 £5,000,000 £6,000,000 £7,000,000 £8,000,000 £9,000,000 £10,000,000 5 10 15 20 25 30 35 40 45 50

Budget (£ million) EVPI in monetary terms

Hard budget constraint Restrictive action £0 £500,000 £1,000,000 £1,500,000 £2,000,000 £2,500,000 £3,000,000 5 10 15 20 25 30 35 40

Budget (£ million) EVPI in monetary terms

Standard EVPI Soft budget constraint

Chalabi et al 2008, and McKenna et al 2010

• 25,000
• 20,000
• 15,000
• 10,000
• 5,000

5,000 5 10 15 20 25 30 35 40 45 50 Cumulative incremental NHE at population level for EECP , QAL Y

Time, years

Capital cost spread over 10 years Capital cost incurred in year 1

Technology time horizon

Irrecoverable (opportunity) costs

• Irrecoverable per patient treatment costs (NHE profile)
• Irrecoverable costs allocated over time (e.g., capital costs of equipment)

McKenna and Claxton 2011 and MRC/NIHR 2011

Irrecoverable (opportunity) costs

0.0 0.2 0.4 0.6 0.8 1.0 1 2 3 4 5 6 7 8 9

Probability that research is conducted Time for research to report, years

4-year design 3-year design 2-year design 1-year design

Necessary condition for OIR Sufficient condition for Approve

• Research is not possible with approval (incentives and ethics)
• Irrecoverable opportunity cost (value of information forgone)

Griffin et al 2011 and MRC/NIHR 2011

Up a creek without a paddle? Where does this leave us?

• Cant fully specify SWF anyway

– At best partial reflection of social value (cant claim efficient/optimal) – Contribute to accountable decisions and progressive change

• No ‘optimal’ simple ex-ante rules

– Depends on budget, policy, what is revealed and when, and remedial actions available – Problem of second best (problem for traditional CBA as CEA) – Understand the limitations and implications

• Account for irrecoverable opportunity costs (price thresholds)

– Reject to approve (only relevant if no uncerinty) – Reject to OIR, OIR to Approve (research not possible) – Reject to OIR, OIR to AWR, and AWR to Approve