Priority Setting
Information on the costs of purchasing health in conjunction with regional or national realities regarding disease priorities, private willingness to pay for health, and public budget constraints can be used to identify widely prevalent investments that are not cost-effective (shaded in figure 2.1) and highly cost-effective opportunities to improve health that policy makers are currently neglecting. Throughout the chapter, "not cost-effective" describes an intervention that has a relatively high ratio of costs to effectiveness. The information provided also may be helpful in identifying interventions that are not cost-effective and are rarely used and cost-effective interventions that are justifiably widely used (unshaded in figure 2.1). The broad objective of this exercise is to help improve global population health by improving understanding of the implications of investing in different interventions. Some of the interventions considered are widely prevalent, whereas others are less well known. Although some interventions are personal, others are population-based (see annex 2.A for definitions). They encompass the spectrum of disease conditions covered in this book but are by no means exhaustive of the universe of possible interventions.
[Figure
2.1]
Cost-Effectiveness
The specific measure of cost-benefit analysis adopted in this volume is cost-effectiveness. Effectiveness is measured in natural units (deaths averted and years of life saved) and in disability-adjusted life years (DALYs), a composite measure that combines years lived with disability and years lost to premature death in a single metric (see chapter 15 for an explanation of how DALYs are calculated). Nevertheless, dollars per DALY averted can at best be only one consideration in the allocation of resources to different diseases and interventions. This chapter also focuses on the total burden of disease avertable by expanding population coverage of an intervention. The delivery of many interventions, including those that are relatively cost-effective, may require a certain degree of institutional and organizational capacity on the part of a health system, and countries will have to pay attention to this important consideration.3 These factors, in combination with other considerations such as equity, social justice, medical suitability, and epidemiological appropriateness, should guide where money may be spent most effectively (Cookson and Dolan 1999, 2000).
Cost-effectiveness ratios can be used to set health priorities in two ways. One approach is to use a cutoff level of cost-effectiveness beyond which interventions are no longer used. This cutoff can vary from place to place depending on the availability of health resources, the disease burden, and the local preferences for health spending. The World Bank has described health interventions that cost less than US$100 per year of life saved as highly cost-effective for poor countries, but this benchmark is arbitrary, as chapter 15 makes clear by noting the interaction with income, budget levels, and the disease burden (Jamison and others 1993).
An alternative approach to using cost-effectiveness data to set intervention priorities is to interpret the cost-effectiveness ratio as the "price" of equivalent units of health using different interventions (box 2.2 explains this approach). Reinterpreted this way, there is no one-dimensional economic criterion that interventions must attain to be declared economically fit, and cost-effectiveness plays the more useful function of informing tradeoffs that policy makers are forced to make when investing in a portfolio of health interventions.
[Box 2.2]
Target Audiences
The general notion of efficiency in how resources, both public and private, are spent on improving health is of interest not only to severely resource-constrained countries that each year spend only a few public dollars on health for each individual, but also to relatively wealthier nations with many competing priorities for public and private resources. The primary audiences for cost-effectiveness information are ministries of health and finance and policy makers in other branches of government in LMICs, both to help reallocate existing outlays in the health sector and to allocate new monies efficiently. Other audiences include aid agencies, international development lending institutions, nongovernmental organizations, and private health care providers.
Priority Setting in the Private Sector
The use of the efficiency criterion in priority setting should not be limited to public resources. A large proportion of health care in developing countries is paid for out of pocket, and greater clarity on interventions that are efficient from an economic perspective is no less urgent when the payer is private: inefficient private spending on health care in developing countries is wasteful as well. Much of this inefficiency may be attributed to significant differences in knowledge—termed information asymmetries—between profit-making providers and patients. Private providers may encourage unnecessary procedures and excessively invasive procedures that, in some instances, can be more dangerous than no treatment at all. Governments have a role to play in lowering these information asymmetries, partly by providing information to populations, for instance, on the importance of childhood vaccinations. Moreover, even if government expenditures are not directly influenced by the lack of efficiency in privately delivered health care, they are affected by the inefficiency of private health systems if private patients seek public emergency care or require other state assistance. In their role as large purchasers of health care, governments—even in largely privately financed health care systems, such as in the United States—exercise enormous influence over the choices of drugs used and interventions provided and can play an important role in promoting policies to facilitate greater efficiency in health care systems.
The costs and efficacy of interventions may vary greatly, even within a single geographical region, depending on local health system capacity, cultural context, disease epidemiology, and a host of other factors. Greater efficiency in how countries spend their health care resources can have a tremendous effect on the health of their populations. Box 2.3 discusses gains from improved priority setting found in the lifesaving study by Harvard University (Tengs 1997; Tengs and others 1995).
[Box 2.3]
