Anne Elixhauser

Estimating costs in the economic evaluation of medical technologies

The complexities and nuances of evaluating the costs associated with providing medical technologies are often underestimated by analysts engaged in economic evaluations. This article describes the theoretical underpinnings of cost estimation, emphasizing the importance of accounting for opportunity costs and marginal costs. The various types of costs that should be considered in an analysis are described; a listing of specific cost elements may provide a helpful guide to analysis. The process of identifying and estimating costs is detailed, and practical recommendations for handling the challenges of cost estimation are provided. The roles of sensitivity analysis and discounting are characterized, as are determinants of the types of costs to include in an analysis. Finally, common problems facing the analyst are enumerated with suggestions for managing these problems.

Issues in Study Design

The heart of every research study is its design. The study design is the structure within which research activity is carried out. It determines the type of data that are collected, the methods of data collection, how the data are analyzed, and the interpretation of the results.

Concepts in Socioeconomic Evaluation

The introduction and use of a medication has several potential effects, which are illustrated in Fig. 2.1. The main purpose of a health care intervention such as a medication (box A) is usually to create positive changes in health status (box B). Such changes can be measured as reductions in an undesired health state (morbidity and mortality) or increases in a desired one (quality of life).

Types of Socioeconomic Evaluation

Socioeconomic evaluations are not a replacement for clinical research that assesses the efficacy of medications; rather, they are an adjunct to clinical or biomedical research. Socioeconomic evaluation techniques bring useful additional information to guide coverage policy, reimbursement, and clinical decisions. While biomedical research is aimed at providing evidence for the clinical efficacy of medications, socioeconomic evaluations examine the effects of drugs on a much broader range of factors including: 1. the use and cost of medical resources 2. the use and cost of resources outside the medical care market 3. the value of wages lost as a result of illness or disability 4. the patients’ social, emotional and physical well-being.

Background on Statistics: Fundamental Concepts

When examining the effect of a certain medication, for example, an antihypertensive, there are two basic options. First, the medication could be given to all hypertensives, that is to the entire population of hypertensives. Alternatively, a sample of individuals from the population could be chosen and the medication could be given to that sample. The first option is, of course, prohibitively expensive and not feasible. Therefore, the second option is chosen.

How to Assess a Socioeconomic Evaluation

This chapter summarizes the information that has been presented in the previous chapters and outlines a process for evaluating reports of socioeconomic evaluations. Table 9.1 summarizes the major study types which have been discussed and differentiates them according to key parameters. This table provides a rudimentary guide to deciding which form of analysis is most appropriate for a given research problem.

Adjusting Costs and Consequences

The numbers reported in socioeconomic evaluations usually need to be adjusted by researchers for at least one of two reasons: either the costs and/or consequences are incurred or accrue over time; or there is considerable uncertainty regarding their true value. This adjustment of costs and consequences allows a more accurate description of the socioeconomic impact of a medication. These two adjustments are termed discounting and sensitivity analysis.

Utility Analysis in Socioeconomic Evaluation

The concept of utility has long been a basic underpinning of economic theory. Utility, in general, is the subjective value ascribed to the possession of a good or service or of a particular state of being. Utility is, in essence, someone’s preference for something relative to something else. The someone need not be the actual consumer of a service or the person whose state is being assessed.

Framework of the Evaluation

In this chapter, we begin to outline certain standards that are expected of all socioeconomic evaluations, regardless of the study type. As discussed in Chap. 3, a socioeconomic evaluation ideally examines all benefits and all costs that accrue to all people over all time relative to all possible alternatives. However, because resources are limited, it is necessary to compromise and to restrict the framework of the evaluation. The focus of a study should be explicitly defined early in a study report, and the first step in defining the focus is the research question. Following a discussion of the elements of the research question, this chapter concludes with a discussion of the pathways of clinical management.

Quality of Life Assessment in Socioeconomic Evaluations

For most patients with chronic disease, it is often not possible to eliminate or cure their illness. The goal of treatment is improved functioning through a reduction in the symptoms or the severity of an illness, or the limitation of disease progression (Wenger et al. 1984). In this case, there may be a direct relationship between functional improvement due to the therapeutic intervention and changes in the quality of life. Despite the effectiveness of some therapies in eliminating symptoms of disease, some clinically effective therapies also create residual limitations in functional ability. The evaluation of new therapies requires a more complete understanding of the impact of the treatment on the patient’s physical, social, and psychological status. This combination of social, functional, and behavioral outcomes, or total psychosocial and physical well-being, is called quality of life.