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Assessment of health producing measures across different sectors
Health Policy 33 (1995) 219-231
ELSEVIER
Assessmentof health producing measures across different sectors Michael Drummond*‘, Greg Stoddartb ‘Centre for Health Economics, University of York, Hesllngton, York, YOI SDD. United Kingdom bG?ntre for Health Economics and Policy Analysis M&aster University, Population Health Program, Canadian Institute for Advanced Research, Hamilton, Ontario, Canada Received 26 May 1994, revision received 16 September 1994, accepted 24 October 1994
To date, economic evaluation of health producing measures has concentrated on health care treatments and technologies. However, it is increasingly being recognized that many health promoting measures are in other sectors, such as education, safety programmes, income maintenance and improvements to the physical environment. This paper examinesthe principles of assessinghealth promoting measuresacrossdifferent sectors and reviews current practice. Such assessmentspose methodological challenges not often encountered in health care evaluations, in framing the evaluation, in identifying, measuring and valuing costs and benefits, and in interpreting results. It is concluded that intersectoral economic evaluation is unlikely to provide a complete technical solution to the problem of allocating resourceswithin and between sectorsof the economy, but that the application of an economic way of thinking could yield benefits. Five proposals are made for taking matters forward. These include undertaking more pilot studies, insisting on a minimum data set to justify spending plans and increasing the incentives for intersectoral collaboration, Keywords:
Economic evaluation; Determinants of health; Health promotion
1. Introductioll
Assessment of health producing measures requires explicit consideration of their costs and consequences. To date, economic evaluation of health producing measures has concentrated on health care treatments and technologies [ 1,2]. However, it is increasingly being recognized that many health promoting measures are in other l
Correspondingauthor.
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sectors such as education, safety programmes, income maintenance and improvements to the physical environment [3-71. Therefore, a decision maker wanting to maxim& the benefits, in improved health, from the use of the health budget may wish to compare programmes not just in health care, but across several sectors. Even if such alternatives are not considered explicitly, decisions about health care funding may have opportunity costs, in forgone health, in other sectors. Labonte [S] pointed out that in 1990/91 Ontario hospitals were to receive $350 million more than they might have had, had their relative share of ministry expenditures been frozen at the 1989/90 level. This could have funded 70 000 subsidized housing units for the homeless or poor, 547 000 more child day-care spaces or 12 750 transition shelter beds for abused women and their children. He argued that each of these alternative programmes could contribute to health and that they were unlikely to expand if institutional health sector spending continued to eat up ever-larger proportions of provincial revenues. A related point is that projects undertaken in other sectors, primarily for other reasons, may have either positive or negative health consequences. For example, investments in new roads reduce the risk of death and serious injury as well as shorten travel times. On the other hand investments in new recreational facilities, although giving enjoyment to those participating, may increase the number of sports injuries. It is therefore relevant for those decision makers interested in health to consider how such projects could be modified, so as to maximize the positive health consequences, and to minimize the negative ones. There are a number of decision makers interested in health. At the governmental level the most obvious body is the Ministry of Health, although most Ministries of Health see the efficient management of the health care system as being their prime concern and do not normally become actively involved in programmes in other sectors, such as education and housing. This approach usually persists in other levels of public decision making, where particular agencies, for example health authorities in the United Kingdom, are allocated a budget to maximize the health status of their local population. However, this is usually interpreted in terms of purchasing or providing health care. Even in jurisdictions where health is one of a number of responsibilities of a single agency, such as county councils in Scandinavia, there is little evidence of intersectoral thinking, in terms of considering a wide range of health producing measures inside and outside the health care sector, or taking note of the positive and negative health consequences of projects undertaken in other sectors. However, there are signs that intersectoral approaches to health are gaining momentum. In recent papers, both M&inlay [9] and Hurowitz [lo] argue for the development of healthy public policy. Also, in the Province of Ontario (Canada) an advisory body, the Premier’s Council on Health Strategy’, was established [ 111. The mandate given to the Council’s Healthy Public Policy Committee included the following objectives: (i) to recommend specific public policy initiatives required to
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improve health beyond the traditional jurisdiction of the formal health care system, and; (ii) to develop a healthy public policy framework that will allow for assessment, characterization and prioritization of healthy public policy initiatives. If the Council and similar bodies in other countries are to discharge their responsibilities effectively, they need access to data on the costs and benefits of health promoting measures in all sectors and a means of assessing overall value for money. Therefore, this paper addresses the following issues: l how, in principle, should intersectoral choices be evaluated from an economic perspective; l in practice, what are the methodological and institutional challenges posed by such analyses; l given the difficulties, what contribution can an economic way of thinking make?
In addressing these issues it is not our objective to be prescriptive since, as will become clear, the current methods for undertaking intersectoral evaluations are far from perfect and, in any case, the scope for using the results of such analyses will depend on the existing decision making structures in different settings. Rather, we seek first to raise awareness of non-health care alternatives. Second, we will argue that, despite the imperfections in analytical methods, application of an economic way of thinking to these broad choices will yield benefits. Third, we will suggest that certain modest institutional initiatives can be taken to further the cause of intersectoral thinking about health. The paper is organized in the following manner. First, we discuss the principles of assessing the costs and consequences of health producing measures in different sectors. Then we discuss the methodological problems that such evaluations pose. In Section 4 we discuss what contribution an economic way of thinking can make, given these problems, and outline a modest proposal. Finally, we draw some conclusions. 2. Assessing costs and consequences across different sectors: the principles
There are a number of forms of economic evaluation [l], but in principle the ideal method for undertaking intersectoral evaluations is cost-benefit analysis. In cost-benefit analysis (CBA) all the costs and consequences of alternative programmes would be valued in a manner consistent with the principles of Paretian welfare economics [12]. In Paretian welfare economics the existing distribution of income is accepted and individuals are assumed to be the best judges of their own welfare. Therefore, CBA is used in order to attain an efficient allocation of resources in situations where markets are considered to ‘fail’, perhaps because of the existence of externalities or monopoly power. Thus no particular budget would be predetermined for health programmes, nor the public sector in total. Rather it would be determined by assessing whether individual programmes generate a net social benefit. The size of the public sector, and
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the level of resources to be allocated to health programmes, would therefore be determined by the economic analysis itself. This approach has three essential requirements. First, all possible uses of resources should be identified. Therefore, there would need to be a careful identification of all potential health sector and non-health sector projects. Second, all benefits would have to be valued in terms of what individuals would be willing to pay for them. Third, shadow prices (i.e. reflecting true marginal social costs) would have to be calculated for all the resources consumed by the various programmes. In some cases market prices might be taken as surrogates for shadow prices, but for many resources, for which there is no market price (e.g. volunteer time), or for which monopoly power is known to distort prices (e.g. medical specialists’ time), adjustments would have to be made. In addition, although Paretian welfare economics takes the existing distribution of income as given, some economists argue that equity considerations are important when arriving at decisions about the allocation of resources and that the criteria for judging whether different allocations (distributions) of costs and benefits are ‘better’ or ‘worse’ are complex, value- and ethics-laden [ 131. Therefore, it is sometimes argued that costs and benefits in a CBA should be weighted, by a set of distributional weights, in relation to whom they accrue. This links to a broader debate about the nature of the social welfare function to be assumed when undertaking CBA. The social welfare function implied by a simplistic interpretation of the Paretian value judgement, that an improvement in efficiency exists if one person is made better off and nobody worse off, is regarded by many as being unnecessarily restrictive. Kaldor and Hicks proposed a modification, where a potential Pareto improvement could be said to exist when the gainers from a particular project could compensate the losers [ 141. More fundamentally, Sugden and Williams [ 151 proposed an alternative approach to CBA, which they called the decision making approach, to contrast it to the Paretian approach. This starts from the premise that the relevant question to ask is ‘What objective would a social decision-maker choose to pursue?‘. They suggest that ‘there is a strong argument that, at least in a fairly centralized public decision-making system, the objective chosen normally will correspond to that implied by the potential Pareto improvement criterion if the government, through its control of the tax system, has the power to convert potential Pareto improvements into actual Pareto improvements’. Of course, a problem arises if, in examining particular projects or programmes, one cannot assume this to be the case. Therefore, in this decision making approach to CBA it is likely that the analyst would also consider other social objectives in addition to efficiency. The analysis becomes more of an interchange between the analyst and the decision maker, and a forum for making the decision makers’ values explicit. Indeed, Mishan [12], one of the main advocates of Paretian CBA, has acknowledged that an economic analysis conducted according to Paretian principles may not give the unambiguously ‘preferred’ solution to the resource allocation problem. He argues that “earlier endeavours to base the Pareto criterion of economic efficiency on a consensus, or ‘virtual constitution’, which, if tenable, would render economic
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calculation, and economic ranking of alternatives, independent of the outcome of the (democratic) political process” probably have to be abandoned (Ref. [12], preface, page xiv). Therefore, the total willingness to pay for a given project should be more modestly regarded as the result of an exercise in positive economics, one having no necessary normative overtones. That is, it does not imply that the projects with highest ranking, based on such calculations, should necessarily be accepted. Whatever the approach adopted to CBA, it is clear that the principles place considerable, perhaps prohibitive, demands on the analyst. In particular all possible options for the use of resources need to be identified and all the costs and benefits need to be valued. Although in the health care field much has been said in the literature about the problems of valuing health benefits, the estimation of shadow prices of resources is not trivial. It has only been pursued to any great extent in evaluations performed in developing countries [ 161. The analysis would also take place independently of any procedures for allocating ministry budgets. Indeed, it would be the cornerstone of the method for their allocation. Some economists argue that this task is beyond CBA, since the approach is grounded in partial equilibrium analysis, and that a general equilibrium approach, where the whole economy is modelled, is what is really required [ 171. Indeed, a major obstacle to the ‘technocratic’ application of CBA is that such analysis does not fit well with existing decision making structures. At all levels of decision making, budgets are set through a political bargaining process, not as the result of a complex analysis of the costs and benefits of all potential competing projects. Therefore, a comprehensive CBA of all options in all sectors may be neither realistic nor useful. However, there remains the need, identified in Section 1 above, to think more broadly about investments in health producing measures. Thus, it is important to examine more fully the problems and potential of undertaking intersectoral assessments of the costs and consequences of health projects. 3. Metbodologicd
problems in intersectoral evaluations
It is noticeable that there have been very few attempts at intersectoral economic evaluations of health producing measures. In an early study, Grosse [18] presented data for the USA on the cost per life-year saved of different lifesaving interventions in the health care and non-health care sectors. His interest was in putting interventions to detect and treat cancer into a broader perspective. He argued that a sole concentration of resources in the health care sector would be inappropriate. Therefore, in a world where, on an incremental basis, more resources to save lives become available, Grosse’s simple analysis showed that the appropriate policy response was inters&oral rather than unisectoral. One of the most comprehensive intersectoral evaluations of health producing measures is that undertaken by Graham and Vaupel [19]. Their study also adopted the simplifying approach of choosing one health outcome, life-years saved, as the outcome of interest. However, the main contribution of their study was that it con-
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Table 1 Values of life implied by a range of public policy options in the USA Problem area
M=Y
Base case policy option
Alternative policy option
Highway safety Highway safety
NHTSA NHTSA
Compulsory belt usage law 55 miles/b speed limit
Highway safety Heart disease policy Pertussis vaccine Heart disease policy Saccharin Carcinogens in water Vinyl chloride Bfmene emissions
NHTSA HHS HHS HHS HHS EPA OSHA EPA
status quo Status quo prior to 55 miles/h limit Status quo status quo Immunize status quo status quo 1000 fil rule 50 p.p.m. 97% control
Mandatory air bags Mobile CHD unit No program Diet program Ban 500 pl rule 1 p.p.m. 99% control
cost per life-year saved (S) 0 0 538 1800 4200 6500 8500 390000 490008 3200000
Adapted from Graham and Vaupel 1191.
sidered alternative policies promulgated by different Federal agencies in the USA, where improved health was the main stated objective. In total 57 policies were assessed. A subset of their results is given in Table 1. This confirms the finding from Grosse’s earlier study, that there is no simple and unambiguous ranking of health promoting measures across sectors in terms of cost-effectiveness. Indeed, a major contribution of Graham and Vaupels’ work is that it stresses that the costeffectiveness of programmes needs to be assessed at the margin. For example, many policies have laudable objectives (e.g. to reduce benzene emissions), the key issue is that of how much emissions should be reduced. The implication from a health policy perspective is that, in making allocations to individual ministries for health improving measures, there is no guarantee of an efficient allocation of resources unless an overview is taken. However, it should also be noted that the individual analyses reviewed in Graham and Vaupels’ study were themselves uni-sectoral. It was the act of bringing them together that constituted intersectoral analysis. This suggests that the most useful contribution of economic analysis to intersectoral decision making is in increasing the awareness of the wide range of possibilities, rather than giving an unambiguous answer to the resource allocation problem. Finally, some evaluations have focused on measures in different sectors targeted at a specific beneficiary group. One example is the study by Joyce et al. [20] which assessed a range of interventions to reduce infant mortality of children of different races. These included various health programmes, such as neonatal care, and government programmes, such as a supplemental food programme for women, infants and children. It was found that early initiation of prenatal care was the most cost-effective means of reducing neonatal mortality for blacks and whites, compared with investments in more health care services. Also, blacks were found to benefit more per dollar of input use than whites. Finally, neonatal intensive care, although
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the most effective means of reducing neonatal mortality rates, was one of the least cost-effective strategies. No studies that we are aware of have come close to attaining the ideal set out in Section 2 above. Furthermore, it is clear that intersectoral economic evaluations pose a number of methodological challenges. These are discussed below. 3.1. Framing the evaluation Framing the evaluation has two components: the choice of viewpoint and the selection of alternatives for evaluation. Many economic evaluations of health care programmes adopt the viewpoint of the main third party payer, often the Ministry of Health. In an intersectoral evaluation the viewpoint is clearly broader than that of a particular ministry. This obviously raises challenges in identifying, measuring and valuing all the costs and benefits, which are discussed below. In addition, given the growing concerns about equity, it may be important to identify the costs and benefits by beneficiary group (e.g. by income, geographical area, socio-economic status, or age and gender). This approach has been used in the regional and local planning literature [21] but is relatively unknown in the health evaluation literature. The selection of alternatives for evaluation poses even more difftculties. With single sector evaluations the range of alternatives is often constrained by managerial (or ministerial) responsibilities, or dictated by particular objectives that have been set for that sector. In the case of intersectoral evaluations everything is an option in principle. Furthermore, in order to implement the ideal economic solution, all possible options for the use of resources would have to be identified and their relative costs and benetits fully quantified and valued. This is clearly impossible. One contribution of economic analysis in intersectoral evaluations may therefore be to help frame the choices, or to cause those with narrower managerial responsibilities to think more broadly about their remit. For example, it would make sense for the Ministry of Health to consider making a financial contribution to a new road building scheme if, through introducing additional safety measures, lives could be saved, or injuries reduced, at a lower marginal cost than that of health care programmes currently under consideration. At the present time this rarely happens because the Ministry of Health does not consider road building to be its ‘business’ and is largely unaware of the plans that the Ministry of Transport may have. Another approach may be to frame choices not in terms of sectors, but in terms of beneficiary group. That is, instead of talking about improving health or the level of education, one could assess the range of programmes aimed at improving early childhood development, for example. Indeed it is possible to conceptualise the interse&oral evaluation issues in terms of a cube, with the three potential foci being the sector, the outcomes (health, non-health) and the beneficiary group (see Fig. 1). Different evaluations of health promoting measures typically hold one of the dimensions constant (i.e. ‘freeze’ one face of the cube) at any one time. For example, many evaluations of health promoting interventions are single sector, yet involve multiple outcomes (health and non-health) and are targeted at many beneficiary groups. This is true of the interventions discussed in the recent policy document called ‘Health of the Nation’, issued by the Department of Health in the United
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OUTCOMES (health, non-health)
SECTOR (e.g. health, education, transport)
BENEFICIARY GROUP (e.g. the elderly, single parent families) Fig. 1. Intersectoral evaluation cube.
Kingdom [22]. Many interventions, such as those involving changes in diet and lifestyle, although delivered primarily through traditional health care channels (e.g. health promotion programmes) may have benefits beyond improved health itself. Other evaluations may be of interventions involving multiple sectors and multiple beneficiaries, but having a single outcome of interest. For example, interventions to reduce coronary heart disease could involve screening and drug therapy within the health care sector, changes in agricultural policy, such as subsidies for producing healthy foods, or tiscal interventions such as changing the taxation on cigarettes and alcohol. Finally, some evaluations may be of interventions involving a range of sectors with multiple outcomes, targeted at a single beneficiary group. An example would be the evaluation of programmes to improve the health and welfare of low-income families. These could include special health services, improved education facilities, subsidized housing, or income support. 3.2. Identifying, measuring and valuing costs and benefits Intersectoral evaluations undertaken from a societal viewpoint face major challenges in identifying the relevant costs and benefits. The setting of the boundaries of a study is a major analytic decision. For example, in an evaluation of a health promotion campaign to reduce smoking should one take account of the industrial and economic impacts of a decline in the tobacco industry, or any health impacts of increased unemployment that may result? There are many examples of the importance of costs or benefits occurring in sectors other than the one of prime interest in a specific evaluation. For example, a programme to reduce pollution in the atmosphere not only improves the general
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aesthetic appearance of the environment, but also increases respiratory health. There are also many intersectoral links on the cost side of the equation. A programme to reduce toxic emissions in plants manufacturing polyvinylchloride also led to considerable increases in the efficiency of the manufacturing process [23]. These benelits were totally unexpected and greatly outweighed the costs of the pollution control programme. By contrast, in single sector evaluations, boundaries can be more easily drawn. For example, one might argue that, in evaluating alternative uses of the health care budget, analysts should restrict their attention to the health impacts since these are the prime responsibility of the Ministry of Health. Another problem relates to the measurement of costs and benefits. In some sectors, most notably health, economic analysis can be based on the results of controlled experiments (e.g. controlled clinical trials) [24-261. By contrast, there are almost no controlled experiments of broader health promotion measures or intersectoral programmes to improve health, because of the cost, feasibility and social acceptability of such evaluations [27]. This means that, of necessity, the evidence of the impact of many intersectoral programmes will require modelling and will be based on a number of assumptions. In the health sector itself (e.g. economic evaluation of interventions to reduce cholesterol) modelling studies have been the subject of increasing controversy [28]. The valuation of costs and benefits in intersectoral evaluations also poses challenges. Since the outcomes (health and non-health) will be disparate, monetary valuation, as in cost-benefit analysis, would be the preferred approach. In some sectors, most notably environmental protection and transportation, monetary valuation consistent with the Paretian principle of willingness-to-pay is well established (291. In some other sectors, most notably education, monetary valuation of benefits is more closely linked to the human capital approach. In the health care sector, many evaluations value the outcomes in non-monetary units, such as quality-adjusted lifeyears gained or healthy years equivalents, although willingness-to-pay approaches have recently experienced a renaissance [30-32). The renaissance of willingness-to-pay measurement in health offers new hope for intersectoral evaluation. However, many technical issues still need to be discussed. These include whether willingness-to-pay questions should be open-ended or relate to discrete monetary amounts, whether the questions should incorporate risk and whether, in jurisdictions where individuals are not normally called upon to pay for health care, the questions should be framed in terms of increased public spending on health care rather than individual willingness-to-pay. Another aspect of valuation is the procedure adopted to discount costs and benefits occurring in the future to present values. Although certain conventions have been followed in the literature (e.g. to discount both costs and benefits by 5% per annum in real terms) these have little theoretical foundation [33]. Some countries, like the United Kingdom, have recommended a single rate for use across all public sector investments in non-traded goods. However, recently the UK Treasury agreed that a zero discount rate should be applied to health benefits in Ministry of Health Programme evaluations [34], although the wisdom of this has been questioned [35]. In the context of the ideal economic approach outlined in Section 2, it would be
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difficult to argue for differential sectoral discount rates, since all benefits would be fully valued in money terms and each project would be potentially substitutable for each other. However, there is some evidence that the discount rate for health may differ from that for other goods and services, and that discount rates may differ by beneficiary groups [6]. Whether this implies that varying discount rates should be used in intersectoral appraisal is unclear, however. 3.3. Interpreting results of evaluations One of the reasons often given for departures from the classical Paretian CBA in health care is the concern about distributive justice. In Paretian CBA the willingnessto-pay estimates obtained relate to the prevailing distribution of income. The distribution of income is thus treated as an issue that can be handled separately. Equity issues are clearly on the agenda of public policy makers in many jurisdictions and it therefore may not be sufficient to argue that the income distribution ‘can be handled separately’. Indeed, many decision makers may view investments in particular public projects as a way of addressing equity concerns. Therefore, their evaluation of projects will not be confined to the efficiency issues, as explored through classical CBA. This suggests that, at the very minimum, intersectoral evaluations will need to take account of the distributive effects of projects among the beneficiary groups. The health sector evaluations using QALYs as outcomes typically assign an equal weight to a QALY, no matter to whom it accrues [36]. Whatever approach to economic evaluation is adopted, it is clear that equity issues need to be addressed. The Premier’s Council in Ontario determined that equity considerations will form part of the advice given to the Premier on every issue and commissioned research on equity [37]. Also, the health economics literature on equity has expanded considerably in recent years [38,39]. 4. What contribution can an economic way of thinking make?
It is clear from the discussion above that it is unlikely that intersectoral economic evaluation will provide a complete technical solution to the problem of allocating resources within and between sectors of the economy. Not only are there serious methodological difficulties in undertaking such analyses, but it is also not clear how the results would be used within the context of existing decision making structures. However, we believe that application of an economic way of thinking (i.e. considering a broad range of alternatives and assessing their relative costs and consequences) could yield benefits. In this context we would make five proposals. First, given the existing evidence that health producing measures are not confined to the health sector, there ought to be more attempts at intersectoral analysis along the lines of that undertaken by Graham and Vaupel [19]. This would both increase awareness amongst decision makers of the non-health care alternatives, and give an indication of the marginal benefits (in improved health) gained from expenditure in different sectors. Second, given the methodological problems identified above, there ought to be a number of pilot studies in intersectoral evaluation. Perhaps the best way to approach
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this would be to select a given beneficiary group (e.g. children of low income facilities, or the elderly) and to think broadly about the options for improving their health. Then attempts could be made to assessthe costs and consequences of the op tions along the lines discussed above. Third, whilst it would not be feasible to undertake full evaluations of all the projecls having health impacts undertaken by different ministries (or agencies), it may be feasible to insist on a minimum data set being provided in order to justify spending plans. The precise contents of such a data set would need careful definition, but it could probably contain items such as: (i) the number and characteristics of the people expected to benefit from a particular project; (ii) the cost of the project; (iii) the nature and quality of the evidence of effectiveness of the interventions proposed; and (iv) the main areas of uncertainty, including the difficulties of implementation. Fourth, consideration should be given to institutional changes that would foster intersectoral evaluation. For example an intersectoral assessment group could be established at the relevant level of decision making, with the remit to review spending plans in different sectors along the lines discussed above and to undertake, or commission, pilot projects. However, as Rovira [40] has pointed out, the establishment of such a group does not guarantee effective cooperation between ministries or agencies in different sectors, especially if the priorities of each party differ radically and the conflicts of interest are large. It would also be unrealistic to expect that there would be an end to budgetary boundaries between different ministries (or agencies for health and other public services), or that they would cease to compete with one another in the bidding process for additional resources. This suggests, finally, that attention also needs to be given to the incentives for intersectoral collaboration. For example, at the moment there is little incentive for an agency dealing with one sector to pay attention to the consequences, good or bad, that its actions have for other agencies and sectors. Similarly, if a modification to a given project could be made, at additional cost, to reduce the risk to health, there is usually no mechanism whereby a financial transfer could be made in order for the modification to be made. However, it may make sense for the agency concerned with health to make such a transfer if the project modification represented better value for money than alternative projects within the health care sector. Some of the other proposals made above will help identify those situations where this potential exists. This would be an essential first step to the design of appropriate incentive systems. 5. coneIusIoos
Whilst our recommendations need further discussion, there is clearly a need for more exploration of the intersectoral health effects of projects undertaken in the health care and other sectors. Given the difficulties in reaching technical solutions to the resource allocation problem, the emphasis should be on increasing the awareness of impacts in sectors other than that of the person deciding on a particular project. Many improvements could be brought about merely by increasing information flows between ministries,
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or other public agencies, and by considering options that cross traditional ministry or agency boundaries. Some of the changes suggested may be difficult to achieve within existing decision making structures, which in the main do not encourage interministry or interagency collaboration. However, the alternative is for single sector decision making to continue, with the attendant risk (for health projects) that more benefits could be obtained if resources were reallocated. Acknowledgements Earlier versions of this paper were presented to the Polinomics Group at McMaster University and to the Research and Policy Group of the Ontario Premier’s Council on Health, Wellbeing and Social Justice. We are grateful to both groups for the constructive comments given and to Nancy Bishop and Vanessa Windass for secretarial assistance. All remaining errors are our responsibility. References [l] Drummond, M.F., Stoddart, G.L. and Torrance, G.W., Methods for the Economic Evaluation of Health Care. Programmes. Oxford, oxford University Press, 1987. [2] Elixhauser, A., Lute, B.R., Taylor, W.R. and Reblando, J., Health care CBACEA: an update on the growth and composition of the literature, Medical Care, 31(7) (1993) JSI-JSll. [3] Auster, R., Levenson, R. and Sarachek, D., The production of health: an exploratory study, Journal of Human Resources, 4 (1969) 441-456. [S] McKeown, T., The Role of Medicine: Dream, Mirage or Nemesis? 2nd Edition, Blackwell, Oxford, 1979. [5] House, J., Landis, K.R. and Umberson, D., Social relationships and health, Science, 241 (1988) 540445. [6] Fuchs, V., The Health Economy, Cambridge MA, Harvard University Press, 1986. [7] Evans, R.G. and Stoddart, G.L., Producing health, consuming health care, Social Science and Medicine, 31 (1990) 1347-1363. [8] Laborite, R., Health care spending as a risk to health, Canadian Journal of Public Health, 81(1990) 251-252. [9] McKinlay, J.B., Health promotion through healthy public policy: the contribution of complementary research methods, Canadian Journal of Public Health, 83 March-April Suppl. 1 (1992) Sll-s19. [lo] Hurowitx, J.C., Toward a social policy for health, New England Journal of Medicine, 329(2) (1993) 130-133. [I I] Premier’s Council on Health Strategy. Nurturing Health: A Framework on the Determinants of Health. Premier’s Council on Health Strategy, Toronto, March 1991. 1121 Mishan, E.J., Cost-benefit Analysis. 4th Edition, Unwin Hyman, London, 1988. 1131 Reinhardt, U.E., Reflections on the meaning of eBiciency: can efficiency be separated from equity? Yale Law and Policy Review, lo(302) (1992) 302-315. [14] Dasgupta, A.K. and Pearce, D.W., Cost-benefit Analysis: Theory and Practice. Macmillan, London, 1972. [IS] Sugden, R. and Williams, A.H., The Principles of Practical Cost Benefit Analysis, Oxford University Press, Oxford, 1979. [la] Little, I.M.D. and Mirrlees, J.A., Project Appraisal and Planning for Developing Countries, Heinemann, London, 1974. [17] Barlow, R., The economic effects of malaria eradication, American Economic Review, 57(2) (1967) 130-147.
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[18] Grosse, R.N., Planning, programming and budgeting, Bulletin of the New York Academy of Medicine, 44 (1968) 125-130. [19] Graham, J.D. and Vaupel, J.W., Value of a life: what difference does it make? Risk Analysis, l(1) (1981) 89-95. [20] Joyce, T., Cormon, H. and Grossman, M., A cost-effectiveness analysis of strategies to reduce infant mortality, Medical Care, 26(4) (1988) 348-360. (211 Lichtield, N., Kettle, P., Whitbread, M. et al., Evaluation in the Planning Process, Pergamon Press, London, 1975. [22] Department of Health. Health of the Nation, DH, London, 1992. [23] Drummond, M.F. and Shannon, H.S., Economic aspects of risk assessment in chemical safety, Science of the Total Environment, 51 (1986) 81-121. [24] Drummond, M.F. and Stoddart, G.L., Economic analysis and clinical trials, Controlled Clinical Trials, 5 (1984) 115-128. [25] Adams, M.E., McCall, N.T. and Gray, D.T. Economic analysis in random&d control trials, Medical Care, 30(3) (1992) 231-243. [26] Drummond, M.F. and Davies, L.M., Economic analysis alongside clinical trials: revisiting the methodological issues, International Journal of Technology Assessment in Health Care, 7(4) (1991) 561-573. [27] E&man, S. and Forbes, J., Economic aspects of health education, Social Science and Medicine, 22 (1986) 443-458. [28] Glick, A., Kinosian, B. and Schuhnan, K., Decision analytic modelling: some uses in the evaluation of new pharmace uticals, Drug Information Journal, 28 (1994) 691-707. [29] Williams, A.H. and Giardina, E. (Eds.), Efficiency in the Public Sector, Edward Elgar Publishing Limited, Aldershot, 1993. [30] Williams, A.H., Economics of coronary artery bypass grafting, British Medical Journal, 291(1985) 326-329. [31] Mehm, A. and Gafni, A., Quality-adjusted life-years, utility theory and healthy years equivalents, Medical Decision Making, 9 (1989) 142-149. [32] Johannesson, M. and JBnsson, B., Economic evaluation in health care: is there a role for cost-benefit analysis? Health Policy, 17 (1991) l-23. [33] Krahn, M. and Gafni, A., Discounting in the economic evaluation of health care interventions, Medical Care, 31(5) (1993) 403-418. [34] Parsonage, M. and Neuberger, H., Discounting and health benefits, Health Economics, l(1) (1992) 71-76. (351 Cairns, J., Discounting and health benefits: another perspective, Health Economics, l(1) (1992) 76-79. (361 Weinstein, M., A QALY is a QALY is a QALY; or is it? Journal of Health Economics, 7 (1988) 289-290. [37] Birch, S., Paper delivered to the Health Economists’ Study Group, Newcastle, July 1994. [38] Mooney, G., Hall, J., Donaldson, C. and Gerard, K., Utilization as a measure of equity: weighing heat? Journal of Health Economics, 10 (1991) 475-480. 1391 Culyer, A.J., van Doorslaer, E. and Wagstaff, A., Utilization as a measure of equity: comment, Journal of Health Economics, 1 l(1) (1992) 93-98. 1401 Rovira, J., Incentives for healthy consumer behaviour and intersectoral measures for health targets. Paper presented at the 1st European Conference on Health Economics, Barcelona, September 1989.
ELSEVIER
Assessmentof health producing measures across different sectors Michael Drummond*‘, Greg Stoddartb ‘Centre for Health Economics, University of York, Hesllngton, York, YOI SDD. United Kingdom bG?ntre for Health Economics and Policy Analysis M&aster University, Population Health Program, Canadian Institute for Advanced Research, Hamilton, Ontario, Canada Received 26 May 1994, revision received 16 September 1994, accepted 24 October 1994
To date, economic evaluation of health producing measures has concentrated on health care treatments and technologies. However, it is increasingly being recognized that many health promoting measures are in other sectors, such as education, safety programmes, income maintenance and improvements to the physical environment. This paper examinesthe principles of assessinghealth promoting measuresacrossdifferent sectors and reviews current practice. Such assessmentspose methodological challenges not often encountered in health care evaluations, in framing the evaluation, in identifying, measuring and valuing costs and benefits, and in interpreting results. It is concluded that intersectoral economic evaluation is unlikely to provide a complete technical solution to the problem of allocating resourceswithin and between sectorsof the economy, but that the application of an economic way of thinking could yield benefits. Five proposals are made for taking matters forward. These include undertaking more pilot studies, insisting on a minimum data set to justify spending plans and increasing the incentives for intersectoral collaboration, Keywords:
Economic evaluation; Determinants of health; Health promotion
1. Introductioll
Assessment of health producing measures requires explicit consideration of their costs and consequences. To date, economic evaluation of health producing measures has concentrated on health care treatments and technologies [ 1,2]. However, it is increasingly being recognized that many health promoting measures are in other l
Correspondingauthor.
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sectors such as education, safety programmes, income maintenance and improvements to the physical environment [3-71. Therefore, a decision maker wanting to maxim& the benefits, in improved health, from the use of the health budget may wish to compare programmes not just in health care, but across several sectors. Even if such alternatives are not considered explicitly, decisions about health care funding may have opportunity costs, in forgone health, in other sectors. Labonte [S] pointed out that in 1990/91 Ontario hospitals were to receive $350 million more than they might have had, had their relative share of ministry expenditures been frozen at the 1989/90 level. This could have funded 70 000 subsidized housing units for the homeless or poor, 547 000 more child day-care spaces or 12 750 transition shelter beds for abused women and their children. He argued that each of these alternative programmes could contribute to health and that they were unlikely to expand if institutional health sector spending continued to eat up ever-larger proportions of provincial revenues. A related point is that projects undertaken in other sectors, primarily for other reasons, may have either positive or negative health consequences. For example, investments in new roads reduce the risk of death and serious injury as well as shorten travel times. On the other hand investments in new recreational facilities, although giving enjoyment to those participating, may increase the number of sports injuries. It is therefore relevant for those decision makers interested in health to consider how such projects could be modified, so as to maximize the positive health consequences, and to minimize the negative ones. There are a number of decision makers interested in health. At the governmental level the most obvious body is the Ministry of Health, although most Ministries of Health see the efficient management of the health care system as being their prime concern and do not normally become actively involved in programmes in other sectors, such as education and housing. This approach usually persists in other levels of public decision making, where particular agencies, for example health authorities in the United Kingdom, are allocated a budget to maximize the health status of their local population. However, this is usually interpreted in terms of purchasing or providing health care. Even in jurisdictions where health is one of a number of responsibilities of a single agency, such as county councils in Scandinavia, there is little evidence of intersectoral thinking, in terms of considering a wide range of health producing measures inside and outside the health care sector, or taking note of the positive and negative health consequences of projects undertaken in other sectors. However, there are signs that intersectoral approaches to health are gaining momentum. In recent papers, both M&inlay [9] and Hurowitz [lo] argue for the development of healthy public policy. Also, in the Province of Ontario (Canada) an advisory body, the Premier’s Council on Health Strategy’, was established [ 111. The mandate given to the Council’s Healthy Public Policy Committee included the following objectives: (i) to recommend specific public policy initiatives required to
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improve health beyond the traditional jurisdiction of the formal health care system, and; (ii) to develop a healthy public policy framework that will allow for assessment, characterization and prioritization of healthy public policy initiatives. If the Council and similar bodies in other countries are to discharge their responsibilities effectively, they need access to data on the costs and benefits of health promoting measures in all sectors and a means of assessing overall value for money. Therefore, this paper addresses the following issues: l how, in principle, should intersectoral choices be evaluated from an economic perspective; l in practice, what are the methodological and institutional challenges posed by such analyses; l given the difficulties, what contribution can an economic way of thinking make?
In addressing these issues it is not our objective to be prescriptive since, as will become clear, the current methods for undertaking intersectoral evaluations are far from perfect and, in any case, the scope for using the results of such analyses will depend on the existing decision making structures in different settings. Rather, we seek first to raise awareness of non-health care alternatives. Second, we will argue that, despite the imperfections in analytical methods, application of an economic way of thinking to these broad choices will yield benefits. Third, we will suggest that certain modest institutional initiatives can be taken to further the cause of intersectoral thinking about health. The paper is organized in the following manner. First, we discuss the principles of assessing the costs and consequences of health producing measures in different sectors. Then we discuss the methodological problems that such evaluations pose. In Section 4 we discuss what contribution an economic way of thinking can make, given these problems, and outline a modest proposal. Finally, we draw some conclusions. 2. Assessing costs and consequences across different sectors: the principles
There are a number of forms of economic evaluation [l], but in principle the ideal method for undertaking intersectoral evaluations is cost-benefit analysis. In cost-benefit analysis (CBA) all the costs and consequences of alternative programmes would be valued in a manner consistent with the principles of Paretian welfare economics [12]. In Paretian welfare economics the existing distribution of income is accepted and individuals are assumed to be the best judges of their own welfare. Therefore, CBA is used in order to attain an efficient allocation of resources in situations where markets are considered to ‘fail’, perhaps because of the existence of externalities or monopoly power. Thus no particular budget would be predetermined for health programmes, nor the public sector in total. Rather it would be determined by assessing whether individual programmes generate a net social benefit. The size of the public sector, and
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the level of resources to be allocated to health programmes, would therefore be determined by the economic analysis itself. This approach has three essential requirements. First, all possible uses of resources should be identified. Therefore, there would need to be a careful identification of all potential health sector and non-health sector projects. Second, all benefits would have to be valued in terms of what individuals would be willing to pay for them. Third, shadow prices (i.e. reflecting true marginal social costs) would have to be calculated for all the resources consumed by the various programmes. In some cases market prices might be taken as surrogates for shadow prices, but for many resources, for which there is no market price (e.g. volunteer time), or for which monopoly power is known to distort prices (e.g. medical specialists’ time), adjustments would have to be made. In addition, although Paretian welfare economics takes the existing distribution of income as given, some economists argue that equity considerations are important when arriving at decisions about the allocation of resources and that the criteria for judging whether different allocations (distributions) of costs and benefits are ‘better’ or ‘worse’ are complex, value- and ethics-laden [ 131. Therefore, it is sometimes argued that costs and benefits in a CBA should be weighted, by a set of distributional weights, in relation to whom they accrue. This links to a broader debate about the nature of the social welfare function to be assumed when undertaking CBA. The social welfare function implied by a simplistic interpretation of the Paretian value judgement, that an improvement in efficiency exists if one person is made better off and nobody worse off, is regarded by many as being unnecessarily restrictive. Kaldor and Hicks proposed a modification, where a potential Pareto improvement could be said to exist when the gainers from a particular project could compensate the losers [ 141. More fundamentally, Sugden and Williams [ 151 proposed an alternative approach to CBA, which they called the decision making approach, to contrast it to the Paretian approach. This starts from the premise that the relevant question to ask is ‘What objective would a social decision-maker choose to pursue?‘. They suggest that ‘there is a strong argument that, at least in a fairly centralized public decision-making system, the objective chosen normally will correspond to that implied by the potential Pareto improvement criterion if the government, through its control of the tax system, has the power to convert potential Pareto improvements into actual Pareto improvements’. Of course, a problem arises if, in examining particular projects or programmes, one cannot assume this to be the case. Therefore, in this decision making approach to CBA it is likely that the analyst would also consider other social objectives in addition to efficiency. The analysis becomes more of an interchange between the analyst and the decision maker, and a forum for making the decision makers’ values explicit. Indeed, Mishan [12], one of the main advocates of Paretian CBA, has acknowledged that an economic analysis conducted according to Paretian principles may not give the unambiguously ‘preferred’ solution to the resource allocation problem. He argues that “earlier endeavours to base the Pareto criterion of economic efficiency on a consensus, or ‘virtual constitution’, which, if tenable, would render economic
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calculation, and economic ranking of alternatives, independent of the outcome of the (democratic) political process” probably have to be abandoned (Ref. [12], preface, page xiv). Therefore, the total willingness to pay for a given project should be more modestly regarded as the result of an exercise in positive economics, one having no necessary normative overtones. That is, it does not imply that the projects with highest ranking, based on such calculations, should necessarily be accepted. Whatever the approach adopted to CBA, it is clear that the principles place considerable, perhaps prohibitive, demands on the analyst. In particular all possible options for the use of resources need to be identified and all the costs and benefits need to be valued. Although in the health care field much has been said in the literature about the problems of valuing health benefits, the estimation of shadow prices of resources is not trivial. It has only been pursued to any great extent in evaluations performed in developing countries [ 161. The analysis would also take place independently of any procedures for allocating ministry budgets. Indeed, it would be the cornerstone of the method for their allocation. Some economists argue that this task is beyond CBA, since the approach is grounded in partial equilibrium analysis, and that a general equilibrium approach, where the whole economy is modelled, is what is really required [ 171. Indeed, a major obstacle to the ‘technocratic’ application of CBA is that such analysis does not fit well with existing decision making structures. At all levels of decision making, budgets are set through a political bargaining process, not as the result of a complex analysis of the costs and benefits of all potential competing projects. Therefore, a comprehensive CBA of all options in all sectors may be neither realistic nor useful. However, there remains the need, identified in Section 1 above, to think more broadly about investments in health producing measures. Thus, it is important to examine more fully the problems and potential of undertaking intersectoral assessments of the costs and consequences of health projects. 3. Metbodologicd
problems in intersectoral evaluations
It is noticeable that there have been very few attempts at intersectoral economic evaluations of health producing measures. In an early study, Grosse [18] presented data for the USA on the cost per life-year saved of different lifesaving interventions in the health care and non-health care sectors. His interest was in putting interventions to detect and treat cancer into a broader perspective. He argued that a sole concentration of resources in the health care sector would be inappropriate. Therefore, in a world where, on an incremental basis, more resources to save lives become available, Grosse’s simple analysis showed that the appropriate policy response was inters&oral rather than unisectoral. One of the most comprehensive intersectoral evaluations of health producing measures is that undertaken by Graham and Vaupel [19]. Their study also adopted the simplifying approach of choosing one health outcome, life-years saved, as the outcome of interest. However, the main contribution of their study was that it con-
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Table 1 Values of life implied by a range of public policy options in the USA Problem area
M=Y
Base case policy option
Alternative policy option
Highway safety Highway safety
NHTSA NHTSA
Compulsory belt usage law 55 miles/b speed limit
Highway safety Heart disease policy Pertussis vaccine Heart disease policy Saccharin Carcinogens in water Vinyl chloride Bfmene emissions
NHTSA HHS HHS HHS HHS EPA OSHA EPA
status quo Status quo prior to 55 miles/h limit Status quo status quo Immunize status quo status quo 1000 fil rule 50 p.p.m. 97% control
Mandatory air bags Mobile CHD unit No program Diet program Ban 500 pl rule 1 p.p.m. 99% control
cost per life-year saved (S) 0 0 538 1800 4200 6500 8500 390000 490008 3200000
Adapted from Graham and Vaupel 1191.
sidered alternative policies promulgated by different Federal agencies in the USA, where improved health was the main stated objective. In total 57 policies were assessed. A subset of their results is given in Table 1. This confirms the finding from Grosse’s earlier study, that there is no simple and unambiguous ranking of health promoting measures across sectors in terms of cost-effectiveness. Indeed, a major contribution of Graham and Vaupels’ work is that it stresses that the costeffectiveness of programmes needs to be assessed at the margin. For example, many policies have laudable objectives (e.g. to reduce benzene emissions), the key issue is that of how much emissions should be reduced. The implication from a health policy perspective is that, in making allocations to individual ministries for health improving measures, there is no guarantee of an efficient allocation of resources unless an overview is taken. However, it should also be noted that the individual analyses reviewed in Graham and Vaupels’ study were themselves uni-sectoral. It was the act of bringing them together that constituted intersectoral analysis. This suggests that the most useful contribution of economic analysis to intersectoral decision making is in increasing the awareness of the wide range of possibilities, rather than giving an unambiguous answer to the resource allocation problem. Finally, some evaluations have focused on measures in different sectors targeted at a specific beneficiary group. One example is the study by Joyce et al. [20] which assessed a range of interventions to reduce infant mortality of children of different races. These included various health programmes, such as neonatal care, and government programmes, such as a supplemental food programme for women, infants and children. It was found that early initiation of prenatal care was the most cost-effective means of reducing neonatal mortality for blacks and whites, compared with investments in more health care services. Also, blacks were found to benefit more per dollar of input use than whites. Finally, neonatal intensive care, although
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the most effective means of reducing neonatal mortality rates, was one of the least cost-effective strategies. No studies that we are aware of have come close to attaining the ideal set out in Section 2 above. Furthermore, it is clear that intersectoral economic evaluations pose a number of methodological challenges. These are discussed below. 3.1. Framing the evaluation Framing the evaluation has two components: the choice of viewpoint and the selection of alternatives for evaluation. Many economic evaluations of health care programmes adopt the viewpoint of the main third party payer, often the Ministry of Health. In an intersectoral evaluation the viewpoint is clearly broader than that of a particular ministry. This obviously raises challenges in identifying, measuring and valuing all the costs and benefits, which are discussed below. In addition, given the growing concerns about equity, it may be important to identify the costs and benefits by beneficiary group (e.g. by income, geographical area, socio-economic status, or age and gender). This approach has been used in the regional and local planning literature [21] but is relatively unknown in the health evaluation literature. The selection of alternatives for evaluation poses even more difftculties. With single sector evaluations the range of alternatives is often constrained by managerial (or ministerial) responsibilities, or dictated by particular objectives that have been set for that sector. In the case of intersectoral evaluations everything is an option in principle. Furthermore, in order to implement the ideal economic solution, all possible options for the use of resources would have to be identified and their relative costs and benetits fully quantified and valued. This is clearly impossible. One contribution of economic analysis in intersectoral evaluations may therefore be to help frame the choices, or to cause those with narrower managerial responsibilities to think more broadly about their remit. For example, it would make sense for the Ministry of Health to consider making a financial contribution to a new road building scheme if, through introducing additional safety measures, lives could be saved, or injuries reduced, at a lower marginal cost than that of health care programmes currently under consideration. At the present time this rarely happens because the Ministry of Health does not consider road building to be its ‘business’ and is largely unaware of the plans that the Ministry of Transport may have. Another approach may be to frame choices not in terms of sectors, but in terms of beneficiary group. That is, instead of talking about improving health or the level of education, one could assess the range of programmes aimed at improving early childhood development, for example. Indeed it is possible to conceptualise the interse&oral evaluation issues in terms of a cube, with the three potential foci being the sector, the outcomes (health, non-health) and the beneficiary group (see Fig. 1). Different evaluations of health promoting measures typically hold one of the dimensions constant (i.e. ‘freeze’ one face of the cube) at any one time. For example, many evaluations of health promoting interventions are single sector, yet involve multiple outcomes (health and non-health) and are targeted at many beneficiary groups. This is true of the interventions discussed in the recent policy document called ‘Health of the Nation’, issued by the Department of Health in the United
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OUTCOMES (health, non-health)
SECTOR (e.g. health, education, transport)
BENEFICIARY GROUP (e.g. the elderly, single parent families) Fig. 1. Intersectoral evaluation cube.
Kingdom [22]. Many interventions, such as those involving changes in diet and lifestyle, although delivered primarily through traditional health care channels (e.g. health promotion programmes) may have benefits beyond improved health itself. Other evaluations may be of interventions involving multiple sectors and multiple beneficiaries, but having a single outcome of interest. For example, interventions to reduce coronary heart disease could involve screening and drug therapy within the health care sector, changes in agricultural policy, such as subsidies for producing healthy foods, or tiscal interventions such as changing the taxation on cigarettes and alcohol. Finally, some evaluations may be of interventions involving a range of sectors with multiple outcomes, targeted at a single beneficiary group. An example would be the evaluation of programmes to improve the health and welfare of low-income families. These could include special health services, improved education facilities, subsidized housing, or income support. 3.2. Identifying, measuring and valuing costs and benefits Intersectoral evaluations undertaken from a societal viewpoint face major challenges in identifying the relevant costs and benefits. The setting of the boundaries of a study is a major analytic decision. For example, in an evaluation of a health promotion campaign to reduce smoking should one take account of the industrial and economic impacts of a decline in the tobacco industry, or any health impacts of increased unemployment that may result? There are many examples of the importance of costs or benefits occurring in sectors other than the one of prime interest in a specific evaluation. For example, a programme to reduce pollution in the atmosphere not only improves the general
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aesthetic appearance of the environment, but also increases respiratory health. There are also many intersectoral links on the cost side of the equation. A programme to reduce toxic emissions in plants manufacturing polyvinylchloride also led to considerable increases in the efficiency of the manufacturing process [23]. These benelits were totally unexpected and greatly outweighed the costs of the pollution control programme. By contrast, in single sector evaluations, boundaries can be more easily drawn. For example, one might argue that, in evaluating alternative uses of the health care budget, analysts should restrict their attention to the health impacts since these are the prime responsibility of the Ministry of Health. Another problem relates to the measurement of costs and benefits. In some sectors, most notably health, economic analysis can be based on the results of controlled experiments (e.g. controlled clinical trials) [24-261. By contrast, there are almost no controlled experiments of broader health promotion measures or intersectoral programmes to improve health, because of the cost, feasibility and social acceptability of such evaluations [27]. This means that, of necessity, the evidence of the impact of many intersectoral programmes will require modelling and will be based on a number of assumptions. In the health sector itself (e.g. economic evaluation of interventions to reduce cholesterol) modelling studies have been the subject of increasing controversy [28]. The valuation of costs and benefits in intersectoral evaluations also poses challenges. Since the outcomes (health and non-health) will be disparate, monetary valuation, as in cost-benefit analysis, would be the preferred approach. In some sectors, most notably environmental protection and transportation, monetary valuation consistent with the Paretian principle of willingness-to-pay is well established (291. In some other sectors, most notably education, monetary valuation of benefits is more closely linked to the human capital approach. In the health care sector, many evaluations value the outcomes in non-monetary units, such as quality-adjusted lifeyears gained or healthy years equivalents, although willingness-to-pay approaches have recently experienced a renaissance [30-32). The renaissance of willingness-to-pay measurement in health offers new hope for intersectoral evaluation. However, many technical issues still need to be discussed. These include whether willingness-to-pay questions should be open-ended or relate to discrete monetary amounts, whether the questions should incorporate risk and whether, in jurisdictions where individuals are not normally called upon to pay for health care, the questions should be framed in terms of increased public spending on health care rather than individual willingness-to-pay. Another aspect of valuation is the procedure adopted to discount costs and benefits occurring in the future to present values. Although certain conventions have been followed in the literature (e.g. to discount both costs and benefits by 5% per annum in real terms) these have little theoretical foundation [33]. Some countries, like the United Kingdom, have recommended a single rate for use across all public sector investments in non-traded goods. However, recently the UK Treasury agreed that a zero discount rate should be applied to health benefits in Ministry of Health Programme evaluations [34], although the wisdom of this has been questioned [35]. In the context of the ideal economic approach outlined in Section 2, it would be
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difficult to argue for differential sectoral discount rates, since all benefits would be fully valued in money terms and each project would be potentially substitutable for each other. However, there is some evidence that the discount rate for health may differ from that for other goods and services, and that discount rates may differ by beneficiary groups [6]. Whether this implies that varying discount rates should be used in intersectoral appraisal is unclear, however. 3.3. Interpreting results of evaluations One of the reasons often given for departures from the classical Paretian CBA in health care is the concern about distributive justice. In Paretian CBA the willingnessto-pay estimates obtained relate to the prevailing distribution of income. The distribution of income is thus treated as an issue that can be handled separately. Equity issues are clearly on the agenda of public policy makers in many jurisdictions and it therefore may not be sufficient to argue that the income distribution ‘can be handled separately’. Indeed, many decision makers may view investments in particular public projects as a way of addressing equity concerns. Therefore, their evaluation of projects will not be confined to the efficiency issues, as explored through classical CBA. This suggests that, at the very minimum, intersectoral evaluations will need to take account of the distributive effects of projects among the beneficiary groups. The health sector evaluations using QALYs as outcomes typically assign an equal weight to a QALY, no matter to whom it accrues [36]. Whatever approach to economic evaluation is adopted, it is clear that equity issues need to be addressed. The Premier’s Council in Ontario determined that equity considerations will form part of the advice given to the Premier on every issue and commissioned research on equity [37]. Also, the health economics literature on equity has expanded considerably in recent years [38,39]. 4. What contribution can an economic way of thinking make?
It is clear from the discussion above that it is unlikely that intersectoral economic evaluation will provide a complete technical solution to the problem of allocating resources within and between sectors of the economy. Not only are there serious methodological difficulties in undertaking such analyses, but it is also not clear how the results would be used within the context of existing decision making structures. However, we believe that application of an economic way of thinking (i.e. considering a broad range of alternatives and assessing their relative costs and consequences) could yield benefits. In this context we would make five proposals. First, given the existing evidence that health producing measures are not confined to the health sector, there ought to be more attempts at intersectoral analysis along the lines of that undertaken by Graham and Vaupel [19]. This would both increase awareness amongst decision makers of the non-health care alternatives, and give an indication of the marginal benefits (in improved health) gained from expenditure in different sectors. Second, given the methodological problems identified above, there ought to be a number of pilot studies in intersectoral evaluation. Perhaps the best way to approach
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this would be to select a given beneficiary group (e.g. children of low income facilities, or the elderly) and to think broadly about the options for improving their health. Then attempts could be made to assessthe costs and consequences of the op tions along the lines discussed above. Third, whilst it would not be feasible to undertake full evaluations of all the projecls having health impacts undertaken by different ministries (or agencies), it may be feasible to insist on a minimum data set being provided in order to justify spending plans. The precise contents of such a data set would need careful definition, but it could probably contain items such as: (i) the number and characteristics of the people expected to benefit from a particular project; (ii) the cost of the project; (iii) the nature and quality of the evidence of effectiveness of the interventions proposed; and (iv) the main areas of uncertainty, including the difficulties of implementation. Fourth, consideration should be given to institutional changes that would foster intersectoral evaluation. For example an intersectoral assessment group could be established at the relevant level of decision making, with the remit to review spending plans in different sectors along the lines discussed above and to undertake, or commission, pilot projects. However, as Rovira [40] has pointed out, the establishment of such a group does not guarantee effective cooperation between ministries or agencies in different sectors, especially if the priorities of each party differ radically and the conflicts of interest are large. It would also be unrealistic to expect that there would be an end to budgetary boundaries between different ministries (or agencies for health and other public services), or that they would cease to compete with one another in the bidding process for additional resources. This suggests, finally, that attention also needs to be given to the incentives for intersectoral collaboration. For example, at the moment there is little incentive for an agency dealing with one sector to pay attention to the consequences, good or bad, that its actions have for other agencies and sectors. Similarly, if a modification to a given project could be made, at additional cost, to reduce the risk to health, there is usually no mechanism whereby a financial transfer could be made in order for the modification to be made. However, it may make sense for the agency concerned with health to make such a transfer if the project modification represented better value for money than alternative projects within the health care sector. Some of the other proposals made above will help identify those situations where this potential exists. This would be an essential first step to the design of appropriate incentive systems. 5. coneIusIoos
Whilst our recommendations need further discussion, there is clearly a need for more exploration of the intersectoral health effects of projects undertaken in the health care and other sectors. Given the difficulties in reaching technical solutions to the resource allocation problem, the emphasis should be on increasing the awareness of impacts in sectors other than that of the person deciding on a particular project. Many improvements could be brought about merely by increasing information flows between ministries,
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or other public agencies, and by considering options that cross traditional ministry or agency boundaries. Some of the changes suggested may be difficult to achieve within existing decision making structures, which in the main do not encourage interministry or interagency collaboration. However, the alternative is for single sector decision making to continue, with the attendant risk (for health projects) that more benefits could be obtained if resources were reallocated. Acknowledgements Earlier versions of this paper were presented to the Polinomics Group at McMaster University and to the Research and Policy Group of the Ontario Premier’s Council on Health, Wellbeing and Social Justice. We are grateful to both groups for the constructive comments given and to Nancy Bishop and Vanessa Windass for secretarial assistance. All remaining errors are our responsibility. References [l] Drummond, M.F., Stoddart, G.L. and Torrance, G.W., Methods for the Economic Evaluation of Health Care. Programmes. Oxford, oxford University Press, 1987. [2] Elixhauser, A., Lute, B.R., Taylor, W.R. and Reblando, J., Health care CBACEA: an update on the growth and composition of the literature, Medical Care, 31(7) (1993) JSI-JSll. [3] Auster, R., Levenson, R. and Sarachek, D., The production of health: an exploratory study, Journal of Human Resources, 4 (1969) 441-456. [S] McKeown, T., The Role of Medicine: Dream, Mirage or Nemesis? 2nd Edition, Blackwell, Oxford, 1979. [5] House, J., Landis, K.R. and Umberson, D., Social relationships and health, Science, 241 (1988) 540445. [6] Fuchs, V., The Health Economy, Cambridge MA, Harvard University Press, 1986. [7] Evans, R.G. and Stoddart, G.L., Producing health, consuming health care, Social Science and Medicine, 31 (1990) 1347-1363. [8] Laborite, R., Health care spending as a risk to health, Canadian Journal of Public Health, 81(1990) 251-252. [9] McKinlay, J.B., Health promotion through healthy public policy: the contribution of complementary research methods, Canadian Journal of Public Health, 83 March-April Suppl. 1 (1992) Sll-s19. [lo] Hurowitx, J.C., Toward a social policy for health, New England Journal of Medicine, 329(2) (1993) 130-133. [I I] Premier’s Council on Health Strategy. Nurturing Health: A Framework on the Determinants of Health. Premier’s Council on Health Strategy, Toronto, March 1991. 1121 Mishan, E.J., Cost-benefit Analysis. 4th Edition, Unwin Hyman, London, 1988. 1131 Reinhardt, U.E., Reflections on the meaning of eBiciency: can efficiency be separated from equity? Yale Law and Policy Review, lo(302) (1992) 302-315. [14] Dasgupta, A.K. and Pearce, D.W., Cost-benefit Analysis: Theory and Practice. Macmillan, London, 1972. [IS] Sugden, R. and Williams, A.H., The Principles of Practical Cost Benefit Analysis, Oxford University Press, Oxford, 1979. [la] Little, I.M.D. and Mirrlees, J.A., Project Appraisal and Planning for Developing Countries, Heinemann, London, 1974. [17] Barlow, R., The economic effects of malaria eradication, American Economic Review, 57(2) (1967) 130-147.
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