Context, normative positions and the key quantities required Karl - - PowerPoint PPT Presentation

Context, normative positions and the key quantities required

Karl Claxton 14/9/2017

Additional health care cost (Δch)

$300 per DALY $30mn Cost = C2 100

Additional health (Δh)

DALYs averted (,000)

Additional health (Δh)

DALYs averted (,000)

Additional health care cost (Δch)

$300 per DALY $30mn 100

Health opportunity cost (k)

$400 per DALY 75

Net health benefits 25,000 net DALYs averted

Additional health (Δh)

DALYs averted (,000)

Additional health care cost (Δch)

$300 per DALY $30mn 100

Health opportunity cost (k)

$400 per DALY $40mn 75 Net health benefits 25,000 net DALYs averted Net value to HCS = $10mn

Additional health care cost (Δch)

$300 per DALY $30mn Cost = C2 100

Additional health (Δh)

DALYs averted (,000)

Additional health (Δh)

DALYs averted (,000)

Additional health care cost (Δch)

$300 per DALY $30mn 100

Health opportunity cost (k)

$100 per DALY 150 Net health costs 50,000 net DALYs gained $20mn Net cost to HCS = $10mn

Other effects (private consumption)

Attributes Investment (Δch = $30mn ) Opportunity costs Net effects Health (,000 DALYs) 100 Consumption benefits (-Δch) $40mn

Other effects (private consumption)

Attributes Investment (Δch = $30mn ) Opportunity costs Net effects Health (,000 DALYs) 100 kh

$200 per DALY

150

• 50

Consumption benefits (-Δch) $40mn

Other effects (private consumption)

• Is failing to avert 50,000 DALYs worth $10mn of additional

private consumption?

– How much consumption are people willing to give up to gain a unit

• f health (vh)

– This project is only worth while if vh is less than $200 per DALY

Attributes Investment (Δch = $30mn ) Opportunity costs Net effects Health (,000 DALYs) 100 kh

$200 per DALY

150

• 50

Consumption benefits (-Δch) $40mn kc = 1

HC$ per consumption$

$30mn $10mn

More generally and formally

Health Health care resources consumption

Ignore other effects Ignore health

• pportunity

costs Ignore other

• pportunity

costs Account for all effects and

• pportunity

costs

h h

c h k     .

h h

k h c     . .

h h h h

c v h v k    

h c h

c c h k      

 

.

h h c

k h c c      

 

.

h h c

v h c c      

h c h h

c c h k v                  

 

.

c h h h h

c k h c k v            

 

.

h h c

v h c c      

.

h c c h h h

c c k c h k v                    

 

. .

c c h h h h h

c k c k h c k v              

 

.

h h c c h h

c v h c k c k              

Other types effects and costs

Attributes Investment (Δch = $30mn ) Opportunity costs Net effects Health (,000 DALYs) vh 100 kh

$200 per DALY

150

• 50

Consumption benefits (-Δch) $1 $40mn kc = 1

HC$ per consumption$

$30mn $10mn

Other types effects and costs

Attributes Investment (Δch = $30mn ) Opportunity costs Net effects Health (,000 DALYs) vh 100 kh

$200 per DALY

150

• 50

Consumption benefits (-Δch) $1 $40mn kc = 1

HC$ per consumption$

$30mn $10mn Equity?

(health, income, income related health)

veq ? keq ? ? Educational outcomes ved ? ked ? ? Environmental capital ven ? ken ? ? Social solidarity ? ? ? ? ?

• Costs falling on other types of public expenditure (Δcx)?

– Δx, kx and vx are not explicitly specified so can not be estimated – Allocation of public finance implicitly reveals kx/vx through observed kh/vh

• Project costs $30m now and averts 100,000 DALYS in year 10
• Ministry faces saving/borrowing real rate of rs = 5%

1 2 3 10 $30mn 100,000 Cost per DALY averted = $489

Time streams of costs and benefits (Δht, Δcht, Δcct)

Cost per DALY averted = $489 $30mn 61,390 DALYs $48.87mn 100,000 DALYs

• Social choices trade health (and other attributes) over time

– HCS turn public resources into health – If reasonable to discount HCS costs must also discount health

Options?

• Express (Δht) as a time stream of equivalent health care

resources (kht)

– Discount at rate that reflects opportunity cost of financing health care (rst)

• Express (Δcht) as a time stream of health gains and losses (kht)

– Discount at a rate that reflects opportunity cost of public finance (rst) and any growth in the ‘value of health’ relative to health care resources (gkh)

• Express everything as a time stream of equivalent consumption

gains and losses (kht , vht, kxt , vxt)

– Discount at a rate that reflects social time preferences for consumption (rct) which will reflect expectations about real growth in consumption opportunities

Time streams of costs and benefits (Δht, Δcht, Δcct)

• Inform and add to the accountability of social choices

– Social objective of legitimate decision makers and values implied by current arrangements

• Prescribe social choice

– A view of what social welfare is ought to be – Commonly restricted individual preferences revealed in markets and their surrogates

• Distinction is important but the differences between well

conducted CEA and BCA is more apparent than real

– What should count? – How should be measure it? – How should we value it?

• All require an assessment of

– Time streams of effects – Opportunity costs associated with current constraints – Value of different types of gains and losses in a common numeraire

Questions of value

• All require an assessment of

– Time streams of effects – Opportunity costs associated with current constraints – Value different type of gains and losses in a common numeraire

• Specify value based a a view of social welfare
• Make explicit and inform the trade offs

– Implied values from current arrangements/policies – Evidence of how others are willing to trade

• Discounting time streams of cost and benefit

– Embedding these question in discount policy is unlikely to contribute to explicit, transparent and accountable social choices

• Improving the reporting of CEA and BCA

– Over reliance on unhelpful summary measures (ICERs, NPV, ROI, CBR)

• Time streams of effects
• How converted into health (and other) opportunity costs
• How converted into equivalent consumption streams
• Consistent assessment of core issues (eg expectations of consumption growth)

–

Common questions of fact