Saturday, May 2, 2009

The Importance of Perspective in Development CEA

“Why Helping Working People Keep Working Is Really Important”
· The costs of missing work for treatment and because of illness should be considered.
· Pneumonia sucks and worsens life by 27.9%.
· It is important to have the right perspective in addressing health problems and if our goal is development, we should approach problems with the good of the whole community in mind.
· Doing an analysis from a societal perspective suggests that we should prioritize working adults in pneumonia treatment.

Note: This also is technical. Sorry to my non-nerd readers if you do not find this interesting.

The following thought just occurred to me in thinking about my previous article: opportunity cost has been ignored. When we normally think about the ‘cost’ we think about it in terms of dollars spent on treatment, and the ‘benefit’ as being years of quality life lived[1]. In my own analysis, I didn’t discuss the difference in opportunity cost. This will be especially important to development.

If we want a society to develop, a large part of that must be in improving income generation. Any health care analysis cannot ignore the impact it is having on the ability of people to generate income. Ultimately ‘sustainable’ means that people can earn enough money themselves to not need outsiders.

Pneumonia Sucks [9]
So let’s return to our question. Pneumonia (my new favorite developing world illness) has some pretty serious complications. The World Health Organization rates diseases based on how much they suck[2]. And pneumonia sucks pretty hard. The DALY weight is 0.279[3], putting it equal to having an amputated arm or being deaf over the period that you have pneumonia. Another way to put this is that it’s better to live three years without pneumonia than four years with it. That’s how bad it sucks.

The burden of disease (roughly “how bad it sucks”) is not the same thing as the cost. It is essential to determine who is spending the money when considering in the cost. In my previous analysis, I was incorrectly considering the patient perspective.

In my previous (conceptual) analysis, I ignored the cost of visiting the doctor and loss of productivity at work. This will be a huge driver of the overall cost, particularly when considering disease in working-age adults. Not being able to breathe sucks for a child, but it doesn’t affect as directly the income generation of the family. And this is a critical consideration in development. Health, at least at this stage of development, should be a means to the end of self-sufficiency. Time is extremely valuable, especially when a person’s time is worth $1 a day.

Simplified, Make-Believe Analysis
Warning: Math approaching. For those who have had severe allergic reactions to math in the past, it is recommended that you skip to the “Discussion” section. But it shouldn’t be all that bad. There's nothing but the four basic operations[11].

Let’s get back to pneumonia. Imagine Abasi, a 30 year old Kenyan man with a wife and a 5 year old daughter named Sakina, coming down with pneumonia. He’s sick and he’ll stay sick until he gets treatment which costs $4.00 (and we’ll assume that it’s perfectly effective). Abasi will die five years after getting pneumonia if it remains untreated. Let’s also say that he’s only able to work at 75% capacity because of his difficulty breathing. The clinic is far away, so it takes a full day to walk to the clinic, get treatment and walk home. In that day, he loses $1.00 worth of productivity. But every day, he’s losing $0.25 because he can’t work. Healthy, Abasi can look forward to 33 more years[4]. Sick, he only has 5 (and that with a lowered productivity). The ICER can be calculated as follows:

This means it is cost-saving. In the long-run, Abasi saves money by getting treatment. This is superb. In a sense, it is literally an investment ($5 initial investment to save $312 which is a 6200% increase in 5 years; that’s what I call an ROI).

If the analysis were repeated from the perspective normally taken (the “provider” perspective), it comes out costing money. Repeating the analysis above from a provider perspective (ignoring ignoring the value of Abasi’s time and lost wages), it comes out to costing $0.14/DALY.
Now imagine his daughter, Sakina, comes down with pneumonia. She should be able to look forward to 56 more years of life and has the same five years to live if she doesn’t get treatment[4]. The difference here is that she doesn’t help generate income for Abasi, so the major economic impact on Abasi drops out of the equation. He still has to take the day to travel to the doctor, pay the same amount for the medication, and (for the sake of this simplified analysis[5]) have the same discounted DALYs. From Abasi’s perspective, the ICER for his daughter is:

ICER = [($1.00+$4.00)-$0.00]/(56-3.6) = $0.10/DALY
Note that this is now positive; when Abasi spends money to save his daughter, it is not cost-saving. Nevertheless, if Abasi values a year of his daughter’s life at something more than $0.10, he should buy the medications. The provider perspective (which doesn’t care that Abasi took a day to travel) is $0.08/DALY.

One more exercise. Imagine we took the societal perspective, concerning ourselves with the overall wellbeing and costs to society. And imagine we were concerned about only a five-year window rather than the lifetime of Abasi and Sakina. With smaller windows, long-term goods are washed out, but it’s a conservative assumption that is verifiable. Would this be cost effective for Abasi’s pneumonia? Sakina’s? Repeating the analysis from a 5-year societal perspective shows that it is cost-saving for Abasi and cost-effective for Sakina ($3.57/DALY) [7].

Cost saving
5-year Societal[10]
Cost saving

So as you can see, the only perspective where treatment of Sakina is more cost-effective is in the provider perspective. Which helps explain why we are so concerned about saving the children: from our perspective (that is, one only concerned with health and not development), it’s a better idea to treat kids before adults. But if you are Abasi, or if you care about the immediate development of the society he lives in, then you ought to prioritize him.


What’s my point? First, these numbers should wake us up: 8 cents for a year of healthy life[8]. I don’t bother to stop and pick dimes up off the street. And yet it is for want of this that people like Sakina are dying[6].

Secondly, these numbers should be translated from Imagination Land to reality. I made all this up out of thin air. I think in this easy case (pneumonia treatment), I’m probably right in recommending emphasis on treatment of Abasi. But there are many questions which are not so easy. Most treatments are not extremely cheap, extremely effective and most diseases do not have the morbidity profile of Pneumonia. Even in Pneumonia, if treatment was not close to 100% effective as I assumed, or if there were significant side effects, or the costs were more than $4.00 (which is certainly possible), these conclusions do not stand. Most work in this area is either not applicable; treatment costs and regiments in the developed world are perfectly irrelevant to the developing world. It would be quite useful to compare the cost effectiveness of various developing world interventions from a societal perspective, side-by-side, using local prices. If such a model were constructed well, the details could be adjusted (i.e. Penicillin here costs $3 instead of $1.50 in Kenya) and the conclusions, recalculated.

Finally, it is very important to consider our perspective and our goal. If we don’t care about development and our goal is simply to extend life, then paying for Sakina is the best idea. But if we are concerned about the societal costs, more emphasis should be placed on Abasi; his pneumonia will cost society more than Sakinas in the short term. If we are concerned about development, we cannot just look at saving Sakina. She is truly the future of Kenya, but Abasi is the present. And it is he who must build the future. He must have an income to support Sakina, pay for her school, and tear off the shackles of poverty. And health interventions ought to aid him.

This analysis shows that it is extremely important to care for those who are the ones developing. Mercy compels us to care first for Sakina; prudence reminds us to care for Abasi first. It is the same thing that they tell you on airplane safety videos. While mercy compels us to put the oxygen mask on our children first, prudence (and the video) reminds us to put it on ourselves first so that we can be able to help our children. Let it be so in Kenya.
If our goal is five-year development, the healthcare should focus on Abasi. But I pray to God that we can find the eight cents to save Sakina.

[1] I’m sure this thought has occurred to someone; it may actually be taken into account in the calculation of DALYs. In a brief review of DALY definition (Drummond, et al “Methods for the Economic Evaluation of Health Care Programmes” Third Ed. p 187), it did not seem to include lost wages. I’m fairly sure that ‘cost’ of lost work should be counted separately. This does need outside confirmation, however as I’m not certain.
[3] I have found this table at long last! WHO did not make it easy.
[4] Life Tables, Kenya.
[5] As another simplifying assumption, I assumed 0% discounting.
[6] To cover my bases, we can’t just spend $0.14 cents and save someone practically. Health and social systems have conspired against their getting healthy.
[7] The actual numbers are -$219.64/DALY for Abasi and $3.57/QALY for Sakina. The interpretation of the larger magnitude Abasi number is confusing so wasn’t displayed in the text; this sort of analysis isn’t usually used to evaluate methods of saving money. The most important feature is that it is negative.
[8] When I say ‘we’, I mean the developed world. We’re usually in the perspective of the NGO provider.
[9] I have looked for data like I present here many but to no avail. I am very happy about finding it.
[10] Why did I not calculate the 25 year societal perspective? Because I’m fairly sure I need to learn how to discount money (I’ve forgotten how to properly do this) to answer the question even close to correctly. Also I do not know how to compare negative ICERs. Maybe I could model it like an investment?
[11] And if you're really nerdy, you could snicker that there is never more than some combination of the four basic operations. After all, what is integration but an infinite number of additions?

1 comment:

  1. "Finally, it is very important to consider our perspective and our goal. If we don’t care about development and our goal is simply to extend life, then paying for Sakina is the best idea. But if we are concerned about the societal costs, more emphasis should be placed on Abasi; his pneumonia will cost society more than Sakinas in the short term."
    I think this is a particularly astute distinction. However, helping Abasi first is still only a short-term solution.

    "If our goal is five-year development, the healthcare should focus on Abasi. But I pray to God that we can find the eight cents to save Sakina."
    Why should helping be Abasi and "saving" (I hate this word when referring to development, and I will explain to you another time why.) Sakina be mutually exclusive? Also, if the policies of the "development project" are for a five-year window, how can you call that sustainable? How can that also help Sakina, thirty years after that five-year window has ended?