To keep most then-existing health insurers around it had to be cost inefficient and leave some of the skim for the health insurance industry. And the providers could not come out net negative.
And it is always at risk from "repeal and replace," one of the main planks of the republican party. But this recent foray in the House has showed that only repeal is possible. It cannot be "replaced" because the nation cannot even decide if healthcare is a basic right or a commodity that some on the far right gleefully wish to deny others because the market cannot and never will provide supply at the demand (price level) that most Americans can afford.
As economists, commentators, or cranks, we can fantasize about market solutions that will magically turn a very distorted and dysfunctional system into an Elysian Field complete with widgets that grow on trees and efficient market theorizers that pick up every loose penny as soon as it falls to the street. Maybe when more of Congress agree that healthcare is a right US healthcare will move much closer to universiality.
QALY’S
(Quality-adjusted life year(s)) PROVIDE “OBJECTIVE” GUIDANCE.
This post takes the Author into dark and deep water. This post takes on healthcare economics straight on. Right between the eyes. The Author, as many readers know, was formerly a healthcare law and economics geek. He would have remained one, but grew ill watching the nation in the 1990s eschew healthcare cost containment.
QALY (quality-adjusted life years) is a formula for measuring the long-term effectiveness of a healthcare treatment or intervention. QALYs are often combined with a cost factor to assess and compare the relative value of a treatment or intervention. QALYs give healthcare economists and policy makers an important, if somewhat limited, method of valuing the cost and effectiveness of treatments across populations.
HERE’S HOW TO CALCULATE A QALY:
If a treatment or intervention provides one year of “good health”, it yields one QALY. Such a treatment could also yield more than one (or sometimes less than one), QALY(s).
As most of you know, the Author just underwent open-heart surgery. This intervention saved his life and he is now in “good health” again. Given an estimated life expectancy of 80, the Author has 30 more years of good health to expect (at least from the heart surgery), so the heart surgery can be assigned a QALY of 30.
QALYs can also be less than one, and many interventions yield less than perfect health. Death is assigned a factor of 0. Some health states are considered worse than death (consider Terry Schaivo). Below is a graph of QALY health state valuations using the EQ-5D weighting system:
Health state Description Valuation
11111 No problems 1.000
11221 No problems walking about; no problems with self-care; some problems with performing usual activities; some pain or discomfort; not anxious or depressed 0.760
22222 Some problems walking about; some problems washing or dressing self;
some problems with performing usual activities; moderate pain or discomfort;
moderately anxious or depressed 0.516
12321 No problems walking about; some problems washing or dressing self; unable to perform usual activities; some pain or discomfort; not anxious or depressed 0.329
21123 Some problems walking about; no problems with self-care; no problems
with performing usual activities; moderate pain or discomfort; extremely
anxious or depressed 0.222
23322 Some problems walking about, unable to wash or dress self, unable to perform usual activities, moderate pain or discomfort, moderately anxious or depressed 0.079
33332 Confined to bed; unable to wash or dress self; unable to perform usual
activities; extreme pain or discomfort; moderately anxious or depressed
-0.429
Note that the last condition yields a QALY of less than 0. Also remember that this scale is much generalized. This health state scale was taken from “What is a QALY”, published by Hayward Medical Communications.
LESS THAN ONE, LESS THAN A QALY?
Many interventions, as you can see from the health state scale above, yield QALY factors of less than one. For simplicity, let’s say that an intervention will provide someone with four years of health state .75. We then multiply 4 (life years) * .75 (health state) and get a QALY of 3. So this intervention (or treatment) provides 3 QALYs.
DARE TO COMPARE?
The intervention above yields 3 QALYs. If we know how many QALYs this intervention yields, we can compare it to other interventions for the same condition. A competing treatment for the same condition as above yields five years of health state .50. So we multiply 5 (life years) * .5 (health state) and get a QALY of 2.5. Ceteris paribus, the first treatment is a “better treatment” Or is it?
MORE YEARS OR BETTER YEARS?
The question above involves a topic close to the hearts’ of healthcare economists. (Or close to the spot where their hearts would otherwise be.) It is the Time-trade off. Below is a definition of the Time-trade off lifted from Wikipedia.
Time-Trade-Off (TTO) is a tool used in Health Economics to help determine the quality of life of a patient or group. The individual will be presented with a set of directions such as:
Imagine that you are told that you have 10 years left to live. In connection with this you are also told that you can choose to live these 10 years in your current health state or that you can choose to give up some life years to live for a shorter period in full health. Indicate with a cross on the line the number of years in full health that you think is of equal value to 10 years in your current health state.
The Time-Trade Off illustrates a problem with QALYs. They are only generalizations that do not account well for individual preferences. But as tools for economists and policy makers, they provide useful formulas to compare treatment efficacies. And when combined with cost-utility ratios, they allow cost-based efficacy comparisons to be made; turning health care decision making from the game of “whatever the doctor orders” to the science of what is most cost-effective.
MORE NEXT TIME…
In the next couple of posts we will discuss how to use QALYs to make cost-effectiveness determinations and how to address some well recognized problems with QALYs.
STAY HEALTHY OR HEAL FAST IN THE DESERT OF THE REAL!
This post takes the Author into dark and deep water. This post takes on healthcare economics straight on. Right between the eyes. The Author, as many readers know, was formerly a healthcare law and economics geek. He would have remained one, but grew ill watching the nation in the 1990s eschew healthcare cost containment.
QALY (quality-adjusted life years) is a formula for measuring the long-term effectiveness of a healthcare treatment or intervention. QALYs are often combined with a cost factor to assess and compare the relative value of a treatment or intervention. QALYs give healthcare economists and policy makers an important, if somewhat limited, method of valuing the cost and effectiveness of treatments across populations.
HERE’S HOW TO CALCULATE A QALY:
If a treatment or intervention provides one year of “good health”, it yields one QALY. Such a treatment could also yield more than one (or sometimes less than one), QALY(s).
As most of you know, the Author just underwent open-heart surgery. This intervention saved his life and he is now in “good health” again. Given an estimated life expectancy of 80, the Author has 30 more years of good health to expect (at least from the heart surgery), so the heart surgery can be assigned a QALY of 30.
QALYs can also be less than one, and many interventions yield less than perfect health. Death is assigned a factor of 0. Some health states are considered worse than death (consider Terry Schaivo). Below is a graph of QALY health state valuations using the EQ-5D weighting system:
Health state Description Valuation
11111 No problems 1.000
11221 No problems walking about; no problems with self-care; some problems with performing usual activities; some pain or discomfort; not anxious or depressed 0.760
22222 Some problems walking about; some problems washing or dressing self;
some problems with performing usual activities; moderate pain or discomfort;
moderately anxious or depressed 0.516
12321 No problems walking about; some problems washing or dressing self; unable to perform usual activities; some pain or discomfort; not anxious or depressed 0.329
21123 Some problems walking about; no problems with self-care; no problems
with performing usual activities; moderate pain or discomfort; extremely
anxious or depressed 0.222
23322 Some problems walking about, unable to wash or dress self, unable to perform usual activities, moderate pain or discomfort, moderately anxious or depressed 0.079
33332 Confined to bed; unable to wash or dress self; unable to perform usual
activities; extreme pain or discomfort; moderately anxious or depressed
-0.429
Note that the last condition yields a QALY of less than 0. Also remember that this scale is much generalized. This health state scale was taken from “What is a QALY”, published by Hayward Medical Communications.
LESS THAN ONE, LESS THAN A QALY?
Many interventions, as you can see from the health state scale above, yield QALY factors of less than one. For simplicity, let’s say that an intervention will provide someone with four years of health state .75. We then multiply 4 (life years) * .75 (health state) and get a QALY of 3. So this intervention (or treatment) provides 3 QALYs.
DARE TO COMPARE?
The intervention above yields 3 QALYs. If we know how many QALYs this intervention yields, we can compare it to other interventions for the same condition. A competing treatment for the same condition as above yields five years of health state .50. So we multiply 5 (life years) * .5 (health state) and get a QALY of 2.5. Ceteris paribus, the first treatment is a “better treatment” Or is it?
MORE YEARS OR BETTER YEARS?
The question above involves a topic close to the hearts’ of healthcare economists. (Or close to the spot where their hearts would otherwise be.) It is the Time-trade off. Below is a definition of the Time-trade off lifted from Wikipedia.
Time-Trade-Off (TTO) is a tool used in Health Economics to help determine the quality of life of a patient or group. The individual will be presented with a set of directions such as:
Imagine that you are told that you have 10 years left to live. In connection with this you are also told that you can choose to live these 10 years in your current health state or that you can choose to give up some life years to live for a shorter period in full health. Indicate with a cross on the line the number of years in full health that you think is of equal value to 10 years in your current health state.
The Time-Trade Off illustrates a problem with QALYs. They are only generalizations that do not account well for individual preferences. But as tools for economists and policy makers, they provide useful formulas to compare treatment efficacies. And when combined with cost-utility ratios, they allow cost-based efficacy comparisons to be made; turning health care decision making from the game of “whatever the doctor orders” to the science of what is most cost-effective.
MORE NEXT TIME…
In the next couple of posts we will discuss how to use QALYs to make cost-effectiveness determinations and how to address some well recognized problems with QALYs.
STAY HEALTHY OR HEAL FAST IN THE DESERT OF THE REAL!
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QALYs AND COST-UTILITY RATIOS-COMPARING ORANGES TO ORANGES, ORANGES TO APPLES
Remember that a QALY is a formula for measuring the long-term effectiveness of a healthcare treatment or intervention. QALYs are often combined with a cost factor to assess and compare the relative value of a treatment or intervention. QALYs give healthcare economists and policy makers an important, if somewhat limited, method of valuing the cost and effectiveness of treatments across populations.KEEP YOUR EYES ON THE COIN
More examples. The cost of Treatment B for a disease is $50,000 and it yields 5 QALYs. The cost of Treatment A is $70,000 and it yields 6 QALYs. The calculation to compare the cost-utility ratios is:
Cost of Treatment A – Cost of Treatment B
__________________________________
No. of QALYs produced by Intervention A -
No. of QALYs produced by Intervention B
But before we run the calculation, let’s look at the cost of CALYs for each treatment. Treatment B yields 5 QALYs and costs $50,000. Five CALYs/ $50,000 = $10,000 per CALY.
Treatment A yields 6 QALYs but costs $70,000. Six CALYs/ $70,000 = $11,666 per CALY. So on its face, Treatment B is the more cost effective deal. But it should also be remembered that Treatment B yields 6 CALYs, one more year than Treatment A. Maybe that extra CALY is “worth it”. Let’s see what the cost-utility ratio is and then decide.
$70,000 (cost of treatment A) - $50,000 (cost of treatment B)
___________________________________________
6 QALYs (treatment A) – 5 QALY’s
$20,000
______
1
This means it costs $20,000 to yield 1 additional QALY. Cost effective? Who knows. But under current “QALY” cost-utility quidelines”, $20,000 per QALY is often seen as cost-effective. And for reasons we will look at in the next post, anything up to $50,000 per QALY is usually seen a “cost-effective”.
COST-UTILITY RATIOS DRIVE THE SUN AND WIND IN THE DESERT OF THE REAL!
ARE QALYs INHERENTLY BIASED IN FAVOR OF PREVENTION OVER CURE?
YES, WHEN YOU ARE TALKING ABOUT ZAMBIA AND BURKINA FASO*An article in Slate Magazine, “Wrong Number: Is it Cost Effective to Treat the World’s Poor”, written by pediatric cardiologist Darshak Sanghavi, triggered the Author’s interest in revisiting QALYs. Sanghavi begins the Slate article with the story of one of his former students working in a remote Zambian clinic. A three-year old boy, weighing only 15 pounds, was admitted to the malnutrition clinic. When the student listened to the boy’s heart, the student determined that the boy had a serious heart malformation.
The student then emailed her former professor Sanghavi and asked it there were any inexpensive drugs that she could give the child. Sanghavi replied to the email stating that unfortunately, there were no drugs that could help the child. And without surgery, the child would almost certainly die.
THE ZAMBIAN MEDICAL SYSTEM DOES NOT HAVE THE RESOURCES TO HELP THE BOY
Sanghavi notes the seemingly obvious:
Pediatric heart surgery is fabulously expensive, often costing hundreds of thousands of dollars per case in the United States. Thus it would be foolhardy, goes the thinking, to offer surgery to poor African children who live on less than a few dollars per week. Isn't it better to invest in more cost-effective public-health measures, like mosquito netting to prevent malaria and vaccines against diarrhea? For decades, this kind of reasoning has been used to deny expensive but lifesaving treatments to the world's poor, most notably for HIV infection, in favor of more cost-effective measures focused on prevention. Dollar-for-dollar prevention is supposed to yield greater aggregate quality-of-life benefits than actual treatment.
Sanghavi then states that this argument, prevention buying lots cheap QALYs over expensive intervention, rigs the game so that the world’s poor will rarely receive expensive but effective medical care.
Know what? He is right. QALYs are economic calculations, not moral pronouncements. But unfortunately, money is a devilish limit upon otherwise salutary aims. And even the angels cannot manufacture more of it.
SO WHAT THEN IS TO BE DONE?
Most of the readers know that the author is an economic conservative and a social liberal. Nay, social radical. He believes that everyone on earth deserves a base level of support, food and health care. (Even uninsured Americans.)
To that end, he further believes that developed countries, and emerging developed nations such as Brazil and India, should be required to pay some percentage of their GNP, perhaps around 5%, to developing nations to eliminate hunger, provide medical care, alleviate poverty, and stimulate economic development. Of course the Author recognizes that the governments of some developing nations (and at least one large developed nation) are riddled with corruption. In all cases the funds drawn from developed nations should be provided both to the government and NGOs. This would require that they "compete" for efficiency and effectivenss. In cases where the governments are so corrupt that they cannot be trusted with the resources, the proceeds should go to NGOs.
If there are better solutions, the Author would like to hear them.
ESCHEWING THE CULT OF NATIONALISM SINCE 2001 IN THE DESERT OF THE REAL!
*Zambia and Burkina Faso are relatively poor, developing countries in Africa. The Author is confident that his loyal readers already know this, but offers this explanation for newcomers.
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