Towards a Consistent Payer Perspective: A Microeconomic Approach to Economic Evaluation
- Presenter:
Chair: Willard Manning; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 225
Rationale: Conventional cost-effectiveness analysis (CEA) and cost-benefit analysis (CBA) are regarded by many decision makers as largely irrelevant. One reason is that most studies do not model the costs and benefits unique to different economic agents. Second, the outcomes that are modeled do not necessarily match decision makers’ objective function. Third, the comparators may not represent relevant alternatives. Even CEAs that purport to represent the payer perspective rarely do so in a way that is consistent with realistic models of decision making.
Objectives: The objective of this paper is to outline a framework for conducting economic evaluations from the perspective of payers and purchasers, including individual consumers, health plans, integrated health care delivery systems, and employer and government purchasers of health care.
Methodology: This paper reviews analytic methods used to evaluate health care interventions, including CEA, CBA, cost-minimization analysis (CMA), budget impact analysis (BIA), and return on investment (ROI) analysis. These methods are compared in terms of which costs are included, how costs are measured, analytic horizons, use of discounting, and the distribution of costs and benefits. The types of outcomes considered and the valuations placed on each outcome vary by method and intended audience. A hypothetical screening test scenario is modeled to compare the usefulness of the different approaches for distinct types of payers.
Results: A hypothetical screening test, which together with standard treatments is assumed to reduce mortality from X disease at an average delay of 5 years, provides net economic benefits from the societal perspective and is classified as cost-effective using conventional CEA methods. Using BIA and ROI methods, the financial impact is not favorable to private payers. Using CEA and CBA methods adapted to the perspective of different payers, including adjustment for differential discount rates and attrition or turnover among the covered population, the results are intermediate between societal CEA and ROI findings.
Conclusions: Each type of method has strengths and limitations. Economic evaluations should model the distribution of costs and benefits among different types of payers and assess the economic attractiveness of the intervention from each group’s perspective. This can make economic evaluations more relevant to health insurers, employers, and other payers or purchasers of health care and increase their use in resource allocation decisions.
