Reflecting the Health Opportunity Costs of Funding Decisions Within Value Frameworks: Initial Estimates and the Need for Further Research

Abstract

Purpose: Evaluating whether a new health technology provides good value for money requires an assessment of its opportunity cost. If the opportunity cost of the new health technology exceeds the benefits, however measured, a net loss is produced. Value frameworks using economic evaluation methods have been developed to guide the assessment of the value of new technologies within health care in response to rising spending. However, few explicitly consider health opportunity costs and fewer still base health opportunity costs on empirical estimates. This may partly be due to the dearth of estimates available, with only a handful of countries having estimates based on within-country data. To fill this gap, this study provides estimates of cost per disability-adjusted life year (DALY) averted for 33 high-income countries and the remaining Organization for Economic Cooperation and Development (OECD) and BRIICS countries (Brazil, Russia, India, Indonesia, China and South Africa).

Methods: Cost per DALY averted for each country was based on estimated elasticities of the health effects of changes in expenditure on health outcomes from applying an existing published econometric model that uses cross-country data to an expanded dataset and other existing elasticities drawn from selected UK within-country studies to country-level data on health expenditure, demographic characteristics, and burden of ill health. To provide a comprehensive picture of the state of research around empirical estimates of health opportunity costs for these countries, results from this study are reported against previously published estimates of cost per quality-adjusted life year (QALY) gained for the same countries.

Findings: All but one of the ranges estimated fall below 3× the gross domestic product (GDP) per capita, the upper end of the widely applied range of 1-3× GDP per capita. The range of estimates based on applying an existing published econometric model that uses cross-country data to an expanded dataset are higher than when cost per DALY averted is calculated from other existing elasticities of the health effects of changes in expenditure drawn from selected UK within-country studies. They also tend to be higher than published estimates of cost per QALY gained.

Implications: This study provides placeholder cost per DALY averted estimates that reflect health opportunity costs for 33 high-income countries and the remaining OECD and BRIICS countries. These estimates can be used to estimate the health opportunity costs of government health care expenditure until country-specific health opportunity cost are estimated using within-country data.

Keywords: cost-effectiveness analysis; cost-effectiveness thresholds; opportunity costs; value frameworks.