Cost-effectiveness
With a limited health budget, the Government will have to choose carefully about how to spend public resources. For any new health intervention proposed, it is worth assessing how much health benefit can be gained for the additional costs, in Rand spent and resources allocated. How do the costs and health gains associated with this intervention compare to alternative options that the Government could fund instead?
Standard principles about how governments should spend public resources for health include:
- Choosing health interventions that produce the greatest health benefits for the costs
- Avoiding high-cost interventions that provide limited health benefits
These standards are often measured using a cost-effectiveness threshold:
Cost-effectiveness analysis and thresholds
Cost-effectiveness analysis (CEA) is a common type of economic evaluation used for HTA analysis. It helps us understand the comparative cost per unit of health gained for different medicines, vaccines, and health services. CEA looks at different options and tells us how much more health benefit we can buy if we invest in one type of health intervention versus another option.
There are two parts of the equation:
- Health Benefits gained or lost (usually measured in QALYs or DALYs1)
- Changes in Costs (also called incremental costs)
We use this information to calculate the cost per unit of health gained for a given intervention. Then we compare that number to a standard, country-specific “Threshold” that tells us the highest cost per unit of health gained that would be considered cost-effective.
The cost-effectiveness threshold is meant to help decisionmakers compare how one health intervention compares with the wide range of possible health interventions that could be covered.
1. QALYs are “Quality-Adjusted Life Years” and DALYs are “Disability-Adjusted Life Years.” Both are common summary measures used by health economists to help quantify health benefit across different kinds of health interventions with a standard unit of measurement. While these and other summary measures for health are important for the purposes of health policy & planning, there have also been criticisms that these measures can discriminate against those living with disabilities and the elderly in ways that could raise Equity concerns. As such, cost-effectiveness must be considered alongside other relevant domains.
There are a few additional ways to think about cost-effectiveness:
Comparing interventions for the same health condition
- Does the proposed intervention secure more health benefits for the cost than what is currently available for the health condition?
- Are there any other interventions for the health condition not currently offered that could provide similar health benefits for a lower cost?
- For example, if the proposed intervention is a new medicine for asthma that is very expensive, could a different, cheaper asthma medication be offered that would achieve the same health benefit?
Comparing health interventions for the same target population:
- Is the intervention cost-effective compared to other interventions that address the same population group’s other health needs?
- For example, with a specific child health intervention, we ask how the cost-effectiveness of this intervention compares to other interventions for promoting children’s health.
Other ways to improve cost-effectiveness in providing the intervention
- Are there ways to deliver the health intervention more efficiently to reduce costs and / or improve associated health gains?
- For example, could a diabetes intervention offer group counselling on diet and exercise instead of individual counselling to reduce costs for provider time?
Cost-Effectiveness gains given Systems Factors & Constraints
In the real-world context of the health system & other factors
- Will the expected health benefits be lower than projected?
- Are there additional costs, not already accounted for, that may be needed to effectively deliver this intervention and ensure appropriate uptake?
- How might the changes in expected benefits and/or costs affect the assessment of the intervention – and would it still meet the cost-effectiveness threshold?