Cost-effectiveness or budget impact models?

Michele Intorcia has posted a question on the linkedin network regarding the preference of payors for either cost-effectiveness or budget imact models. Its an interesting discussion and therefore I'd like to post the questions and answers he received so far.

Michele Intorcia asks
Budget Impact Models or Cost-effectiveness Analysis?
Cost-effectiveness analysis has been advocated in the health economics methods literature and adopted in a growing number of jurisdictions as an evidence base for decision makers charged with maximising health gains from available resources. However, budget-holders and payors are increasingly aware that the threshold approach has lead to decisions that resulted in increased expenditures on health care programs and are concerned about the sustainability of public funding for health care programs without any evidence of increases in total health gains. Do you think in future BIMs will be more important than CEAs?

Answers (5)

Pablo Lapuerta
Chief Medical Officer, Cogentus Pharmaceuticals

The importance of CEA is likely to grow more than BIM: while the healthcare system has always been concerned about costs, in the future it has to focus more on value. Consider the example of the UK: the NHS spends as much per capita on health as Kaiser Permanente (a US managed care plan) but its quality of care is measurably inferior (Feachem et al, BMJ 2002;324:135-41 ). Simply put, Kaiser provides better value for money, and experts in the UK realize they must improve the NHS.

Eddie Gibson
Business unit director, Oncology at Bristol-Myers Squibb

The question supposes that both CEA and budget impact are or can be used in similar ways to educate the decision making process. If we dissect the process a little into questions of policy and implementation we could look for where CEA andbudget impact have differential uses: Policy - long term health policy is more likely to be influenced by CEA, which itself looks for long-term enhancements in healthcare and better deployment of resource. This is only likely to strengthen and to expand into other areas of healthcaree beyond its proven ground of pharmaceuticals (note the incorporation of a public health remit into NICEs constitution in the UK) Implementation - CEA has not been used to (and probably is not an appropriate way of defining) to total envalope of healthcare funding; nor can it be used (as your question highlights) to really assess the short term affordability of any action. Here budget impact and some more convential economic approaches of efficiency and productivity drive the activity; the key question is not can the system afford a cost effective therapy but can the budget be freed to implement policy from other areas or does the envelope need to be expanded. So, my feeling is that CEA is here to stay and will become embedded much more strongly than today in many healthcare systems. This will introduce a number of conflicts within these systems in the short term while the budget impact of effecting change catches up with the broad policy direction.

Joel Brill
Chief Medical Officer at Predictive Health, LLC

Michele: In health care, everything old is new again. If you look at how Medicare Part B is funded, we are already using a budget impact model. Infusion / chemotherapy drugs, physician work and practice expense, and facility costs from ASC / IDTF / outpatient hospitals are paid out of the same pool of $$. Thus, as costs for non-professional services increase, professional reimbursement drops - the legacy of the flawed SGR formula. Gail Wilensky made the case for CMS to establish a center for comparative effectiveness in Health Affairs in November 2006 http://content.healthaffairs.org/cgi/content/full/hlthaff.25.w572v1/DC1.
posted 1 day ago Flag answer as...

James Bonnette, MD
CMO, SVP at Vanguard Health Systems

Michele, I agree with Joel Brill, Medicare already uses a budget impact model--but one could argue to no real level of success, thus the now yearly need for Congress to step in and "fix" the SGR so that physicans do not suffer a loss per unit of service--of course what no one has the fortitude to say is that the rate of use of procedures done by physicians is what is driving the problem, and the non-proceduralists are the one who would suffer the most. So we have at least with Medicare part B a heavily flawed, heavily tinkered budget imapct model, that ill serves providers and patients. In terms of CEA, I also agree that it is here to stay, but in some ways it is as flawed as WTP (willingness-to-pay) models and I agree CEA often leads to higher total healthcare expenditures sometimes with demonstrable better outcomes, and sometimes with squishy outcomes (QoL measures for example) Jim Bonnette, MD

Ulf Staginnus
Associate Director Outcomes Research at Bristol-Myers Squibb

Hi Michele, I think CEA considered from an overall economic perspective has not really delivered. We all know the inherent flaws with CEA as a mean for prioritizing healthcare provsion. In analogy to the Austrian school of economics (Friedrich August von Hayek) we should not forget that it is difficult to 'compute the world'.... Healthcare provsion and disease are far too complex matters in order to fit decision making into a single technocratic threshold analysis implemented by several HTA agencies. We may see more use of it, there I agree with the other commentors but it will not address the main question, which is how to better allocate scarce resources to maximize health in general. From a payors perspective the affordibility question is evident and therefore many will increasingly welcome budgetary impact models. Here the problem is the silo mentality in many healthcare systems. Going foreward, there will probably be a need for more thinking around novel financing options for innovative technologies. I think the field would generally benefit from more economics along the product development decision making and in that regard I would like to recommend an article from John FP Bridges "What can economics add to health technology assessment? Please not just another cost-effectiveness analysis!" http://www.future-drugs.com/doi/abs/10.1586/14737167.6.1.19