Estimation of the cost-effectiveness threshold in health per life year gained for Colombia: results of a thesis in Economics of Public Policies
Mateo Ceballos González
MSc in Economics of Public Policy
Researcher in Health Technology Assessment
The results presented in this blog are derived exclusively from the results of the Master's thesis in Economics of Public Policies at the Universidad del Rosario. The complete work can be found in https://repository.urosario.edu.co/handle/10336/20159.
For several decades, health systems around the world have faced an exponential growth in costs and health needs of the population. This has generated an increasingly urgent need for alternatives that promote the efficient and rational use of the available budget, with a view to promoting the health of the population, financial sustainability, and equity in health (1).
In this context, the economic evaluation of health technologies has become an important input for decision-making in health, mainly regarding the financing of new technologies and price regulation (2). This is defined as the comparative analysis of alternative courses of action in terms of costs and consequences (3); Its objective is focused on quantifying the costs and benefits of a health technology (medicine, procedure, medical device, among others) in comparison with its relevant alternatives.
To develop an economic evaluation, information on various inputs is required, among which is the cost-effectiveness threshold. This can be interpreted from two different points of view (4). The first, called the supply approach, defines it as the opportunity cost of allocating resources to a new technology in terms of the health benefits displaced as a consequence of its unavailability to finance other alternatives that compete for the same budget (5 -6). The second, called the demand approach, defines it as the rate at which individuals would be willing to give up for other forms of consumption to improve health, thus representing their willingness to pay (7-8).
In Colombia (as well as in many other countries) the international trend of assuming a threshold between 1 and 3 times the country's GDP per capita has been embraced (9-11). This trend arose from an erroneous interpretation of the report of the Commission on Macroeconomics and Health of the World Health Organization (WHO) in 2001 (12), which became very popular due to its easy implementation. However, the same WHO and other authors have reiterated that it has no theoretical or empirical support, and that its use can exacerbate inequalities and promote a reduction in population health (13-15).
The objective of this work was to carry out an empirical estimate of the cost-effectiveness threshold per Earned Life Year (YLL) for the Colombian health system, from the supply side, based on the estimates made for other countries (16-20 ). An estimate of the threshold based on an explicit, robust and consistent theoretical and empirical framework, will allow a greater scope to be given to the economic evaluations of health technologies that are developed in the country, generating better recommendations for decision-making that contributes to promoting the health of the population, financial sustainability and equity in health.
The estimation of the cost-effectiveness threshold, from the supply approach, starts from determining the relationship between spending and health benefits for the entire population of the country. In other words, it starts from answering the following question: what is the effect of spending a monetary unit on health on the very health of the population? As a measure of the health of the population, the YLGs were chosen.
To establish this relationship between spending and health, an unbalanced panel data type econometric model was built in three dimensions: 1) The insurance companies or EPS, which are in charge of executing most of the health spending; 2) Diseases or health conditions, since they determine the nature and level of expenditure, as well as the YLL that can be expected associated with said expenditure; 3) The time in which the expense occurred, which by availability of information was defined between 2012 and 2016. To calculate the YLL, methodologies of life tables, life expectancy adjusted for health condition and survival curves were used. The expected endogeneity was tried to solve through the instrumental variables approach. The estimation was developed using Ordinary Least Squares in 2 stages.
To feed the model, a new database was built from multiple institutional information sources in the country for the period 2012-2016: Sufficiency Studies, Vital Statistics, Individual Service Provision Registry, Unique Affiliate Database and the financial information from the Superintendency of Health. Due to the availability of information, the estimate was limited to the universe of the contributory regime and technologies included in the Benefit Plan charged to the Capitation Payment Unit (PBS-UPC). As instrumental variables, the financial statements of the Benefit Plan Administrators (EAPB) for each year, and the per capita expenditure of new technologies included in the PBS-UPC in the years 2012-2016, of each EAPB, in each group of health conditions, and for each year.
The results of the econometric model, without adjusting for the instrumental variables, show a coefficient between spending and YLL of 0.0933, not statistically significant, which implies a cost-effectiveness threshold of $8,772,177 per YLL. The exploration of the two instrumental variables analyzed did not yield coherent or non-statistically significant results. Despite the impossibility of finding an adequate instrument to correct endogeneity, the estimate of $8.772.177 by AVG is considered the first empirical estimate of the threshold by AVG from the supply perspective for Colombia and Latin America.
The main limitations of this work, which are emerging as future research focuses, are associated with the limitation of the estimate to the universe of the contributory regime and the technologies included in the PBS-UPC; the non-inclusion of other health measures other than YLL, such as Quality-Adjusted Life Years (QALY) and Disability-Adjusted Life Years (DALY); and the impossibility of identifying and quantifying a good instrument that corrects the expected endogeneity between spending and health benefits.
To read this updated information, we invite you to visit this entry: Colombia, the first middle-income country to have its own Cost-effectiveness Threshold estimate
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