The New Health Service in New Zealand

Abstract

Cost-Effectiveness Analysis in Health Care Cost-effectiveness analysis (CEA) raises questions that are important to be left ot policy analysts and economists. Those who utilize CEA should acknowledge its inherent value system and adapt it to a more ethical usage. Even while under fire for soaring health care costs, American medicine remains without a systematic plan for the allocation of either public or private funds. The percentage of Gross National Product devoted to health care, which more than doubled over the past two decades, has sparked concern that some form of health resources rationing is inevitable.[1] And, ironically, despite advances in health care technology, the public is becoming increasingly critical of its achievements. In particular, there is concern that many expensive procedures are employed unnecessarily and that health care moneys might provide greater if they were spent elsewhere. In other words, society is asking: Are we getting our money's worth? In an attempt to address these questions as well as reconcile economic constraints with contemporary ideals and practice, some analysts have turned to cost-effectiveness analysis (CEA), which, because it yields answers in precise quantitative terms, is very seductive to health policy planners. The Office of Management and Budget requires agencies to prepare cost-benefit or cost-effectiveness analyses, and the Occupational Safety and Health Administration also relies on CEA.[2] However, far from being a pristine mathematical algorithm, CEA employs complex and often overlooked value components along with empirical data. Since CEA addresses fundamental values of life and health, its application can affect issues of justice and quality. The more widely CEA is utilized, the greater is the need to recognize and clarify the ethical concerns it raises. Indeed, as Rashi Fein has suggested, such assessments are too important to be left to analysts and economists.[3] Methods of Measurement All cost-effectiveness computations share the same basic form: Monetary Cost (D) - Monetary Benefits (D)/Health Gained (D) where (D) = discounting of future values. Cost-benefit analysis (CBA), a method originally developed outside the health care sector, has no variable for health itself, but measures it indirectly by assessing its dollar value: Monetary Cost (D) - Monetary Benefits (D) Thus, CEA emphasizes health effects whereas CBA focuses on economic effects. Determining costs is straighforward. These include resources utilized to fund the activity (for example, diagnosis, treatment, rehabilitation), and the costs of undesirable outcomes (such as side-effects or the treatment of false positives). Most analysts also include the costs of future care due to lengthened lifespan resulting from successful treatment--an acknowledgement that sometimes carry additional hidden costs. This is particularly relevant with respect to the elderly. In CBA all benefits, including health gained, are measured in terms of their worth. This is accomplished by utilizing human calculations, which count the productivity (wages) gained as a measurement of the value of health.[4] This value is then included with the other generated by the program, the most important of which is the cost of future medical care averted by implementing the project. CEA can also incorporate capital assessments by adding the dollar value of health into its monetary benefits category. In CEA (but not CBA) health may be measured in a variety of ways: cases prevented, decreased length of hospital stay, reduction in mortality, etc. One popular measurement is the gain or loss of years of life because of an intervention.[5] The additional years of life gained may be adjusted for the quality of life, though this is a controversial ethical point. …