Economic evaluations provide a decision-making framework in which outcomes (benefits) and costs are assessed for various alternative options. Although the interest in complete and partial economic evaluations has increased over the past 2 decades, the quality of studies has been marginal due to methodological challenges or incomplete cost determination. This paper provides an overview of the main types of complete and partial economic evaluations, reviews key methodological elements to be considered for any economic evaluation, and reviews concepts of cost determination. The goal is to provide the clinician neurosurgeon with the knowledge and tools needed to appraise published economic evaluations and to direct high-quality health economic evaluations. (http://thejns.org/doi/abs/10.3171/2014.8.FOCUS14455) Key WORDS • economic evaluation • cost • cost-effectiveness • cost-utility • QALY • cost-benefit • cost analysis • accountingAbbreviations used in this paper: CBA = cost-benefit analysis; CEA = cost-effectiveness analysis; CMA = cost minimization analysis; CUA = cost-utility analysis; EQ-5D = EuroQol 5 Dimension; HCUP = Healthcare Cost and Utilization Project; ICER = incremental cost-effectiveness ratio; NIS = Nationwide Inpatient Sample; QALY = quality-adjusted life year.
The enormous level and rate of increase in health care expenditures in the United States during the past several years has been well documented. A combination of increased health insurance coverage and advances in medical technology, coupled with perverse economic incentives resulting in supplier-induced demand and cost-unconscious demand from patients, has created this explosion in health care spending. This explosive increase has given rise to a variety of private and public sector initiatives to reform the system. With a greater concentration of purchasing power among managed care payors and increased competition among providers, a trend toward dramatically reduced payment for providers continues. Under capitation, the most rapidly growing form of managed care, providers have contracts from insurance companies that call for them to provide care for a fixed per patient annual payment, regardless of what this provision actually costs. This form of per capita payment typically offers drastically reduced payment to providers, forcing them to adopt a cost-reduction strategy. Providers must contain costs while enhancing quality or else perish in this new cost-conscious environment. This new payment paradigm means that price, which is often dictated by the payors, including government, determines the providers' cost rather than cost determining price as it was under the traditional indemnity insurance schemes. It is this new imperative to contain costs while maintaining or else improving the quality of health outcomes that is behind many of the recent mergers and other collaborative activities that we are witnessing nationwide among hospitals and other health care organizations.
Insurance is an economic tool that individuals can use to reduce or eliminate financial risk. Health insurance provides risk reduction for economic loss caused by the need to pay for health care services. Insurance for any circumstance makes economic sense provided that administrative expenses to the insurer (insurance company or health plan) are no larger than the risk-premium or the value to the insured of having economic risk reduced or eliminated. Infertility has generally been regarded as a social problem rather than a medical one. Insurance companies and health plans have been reluctant to cover infertility services because of a lack of societal agreement that these services should be included and because accurate information about both the appropriate sequence of care and its cost effectiveness has not been available. Some health plans that have extended coverage for infertility services have experienced poor economic outcomes because of adverse selection. Adverse selection occurs when asymmetrical information exists, i.e. when those insured have privately held information about whether they will need the covered services or not. There are ways that the private sector can reduce or eliminate adverse selection without government mandates. These include limited coverage, experience rating, exclusion for pre-existing conditions, mandatory wait provisions, medical examinations and group coverage. When private sector efforts to control for adverse selection fail, government intervention may make sense. Governmental mandates are favoured by some because they compel wide coverage, which reduces overall economic risk. Even this can fail to eliminate adverse selection if individuals or couples who are higher risk for infertility move to areas where coverage is mandated. Given societal acceptance of the need for universal coverage for infertility services, the private sector should be able to create an economically beneficial insurance market for this coverage provided that they avoid adverse selection.
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