Measuring Health Care Costs
Thursday, 13 February 2020 14:42
- Costing in economic evaluation
○ All resources used in health care/interventions have opportunity costs,
and therefore we want to identify, measure and value resources used
in health care/services, programmes and interventions
○ Items to be identified for inclusion on the cost side of an economic
evaluation are any resources which have an opportunity cost as a result
of being used in the health care programmes under consideration
- What are 'costs' in health care
○ Direct costs:
§ Health care resources: staffing, consumables, overheads, capital
§ Other related services: community services, ambulances,
voluntary services
§ Costs incurred by patients and their families: out of pocket
expenses, inputs to treatment
○ Indirect costs:
§ Time of patients or their families lost from work
§ Could result in lost production and earnings
§ Value of indirect cost is the value of the lost production
○ Intangible costs:
§ Pain and suffering associated with treatment
- Unit costs of health and social care
○ Nursing homes
○ Drug and alcohol related care
○ Learning difficulties
○ Children and families
○ Social care staff
- How do we estimate costs?
○ Two elements:
§ Measurement of quantities
§ Assignment of unit costs
○ Many elements straightforward e.g. staff costs, wage rates, etc.
because they have a market price
○ Others more difficult because of price distortions e.g. price of drugs.
○ Some even harder due to no market existing e.g. value of patient's time
in seeking and receiving care
, § Assignment of unit costs
○ Many elements straightforward e.g. staff costs, wage rates, etc.
because they have a market price
○ Others more difficult because of price distortions e.g. price of drugs.
○ Some even harder due to no market existing e.g. value of patient's time
in seeking and receiving care
○ Transparency and sensitivity analysis is key
- Methods and data used in estimating costs
○ Top-down (macro) approach:
§ Involves using pre-existing data on total or average costs
§ Costs are not decomposed into their constituent quantities and
prices
○ Bottom-up (micro) approach:
§ Identifies, quantifies and values resources in a disaggregated
way, so each element of costs is estimated individually and
summed at the end
§ This method provides greater insight into the health care
programme being evaluated
§ Also facilitates the reporting of costs as components of quantities
and prices - which increases the transferability of findings across
different health care settings
- How should costs be estimated?
- Marginal cost: cost of producing one extra unit of output
- Incremental cost: the difference in costs between programmes
- Level of precision in costing
Thursday, 13 February 2020 14:42
- Costing in economic evaluation
○ All resources used in health care/interventions have opportunity costs,
and therefore we want to identify, measure and value resources used
in health care/services, programmes and interventions
○ Items to be identified for inclusion on the cost side of an economic
evaluation are any resources which have an opportunity cost as a result
of being used in the health care programmes under consideration
- What are 'costs' in health care
○ Direct costs:
§ Health care resources: staffing, consumables, overheads, capital
§ Other related services: community services, ambulances,
voluntary services
§ Costs incurred by patients and their families: out of pocket
expenses, inputs to treatment
○ Indirect costs:
§ Time of patients or their families lost from work
§ Could result in lost production and earnings
§ Value of indirect cost is the value of the lost production
○ Intangible costs:
§ Pain and suffering associated with treatment
- Unit costs of health and social care
○ Nursing homes
○ Drug and alcohol related care
○ Learning difficulties
○ Children and families
○ Social care staff
- How do we estimate costs?
○ Two elements:
§ Measurement of quantities
§ Assignment of unit costs
○ Many elements straightforward e.g. staff costs, wage rates, etc.
because they have a market price
○ Others more difficult because of price distortions e.g. price of drugs.
○ Some even harder due to no market existing e.g. value of patient's time
in seeking and receiving care
, § Assignment of unit costs
○ Many elements straightforward e.g. staff costs, wage rates, etc.
because they have a market price
○ Others more difficult because of price distortions e.g. price of drugs.
○ Some even harder due to no market existing e.g. value of patient's time
in seeking and receiving care
○ Transparency and sensitivity analysis is key
- Methods and data used in estimating costs
○ Top-down (macro) approach:
§ Involves using pre-existing data on total or average costs
§ Costs are not decomposed into their constituent quantities and
prices
○ Bottom-up (micro) approach:
§ Identifies, quantifies and values resources in a disaggregated
way, so each element of costs is estimated individually and
summed at the end
§ This method provides greater insight into the health care
programme being evaluated
§ Also facilitates the reporting of costs as components of quantities
and prices - which increases the transferability of findings across
different health care settings
- How should costs be estimated?
- Marginal cost: cost of producing one extra unit of output
- Incremental cost: the difference in costs between programmes
- Level of precision in costing
