“Health is bad for you. That’s what many economists believe.” Richard Horton’s anti-economics strikes again.

Richard Horton, editor-in-chief of the venerable medical journal the Lancet, is no stranger to bad economics. In 2012 and 2013, he stoked the ire of economists worldwide with a series of ill-informed tweets. These included gems such as:

A number of measured responses were offered, but it’s unclear if they had any influence on Horton’s thinking.

Well, in this week’s edition of the Lancet, Horton once again wades erroneously into economics. Horton discusses William Baumol’s theory of the cost disease. Briefly, this theory offers an explanation of why healthcare continues to grow as a proportion of GDP. Growth in GDP occurs in part due to an increase in productivity, but growth in some sectors, such as manufacturing, increases more rapidly than in others, such as healthcare and education, which are typically labour intensive. Wages increase in the ‘productive sectors’ as a result of increased output. The wages in the ‘stagnant sectors’ also increase to stay in line with other sectors, but since productivity does not grow as fast either prices rise or profits fall, and it is usually the former. Therefore, healthcare continues to grow as a proportion of GDP as a consequence of economic growth. This is a positive, as opposed to normative, theory and we’ve previously discussed an empirical study examining it. So what does Horton have to say about the cost disease?

Health is bad for you. That’s what many economists believe. A man called William Baumol may be largely to blame. In the 1960s, he invented the notion of a “cost disease” in modern societies. It was a powerful metaphor, one that has shaped the prejudices of many a Minister of Finance ever since. His central idea sounds convincing. Some industries are good at increasing their productivity. As a result, they earn more money to invest in the wages of their employees. These sectors of the economy deserve our praise. There are other sectors where increasing productivity is harder. […] In areas that depend on human beings interacting with one another, as medicine does, productivity gains are hard to achieve. But the salaries of those working in these productivity-poor sectors rise anyway. […] The result of the Baumol effect is a disaster for society. The costs of a concert, ballet, or health service increase even though productivity stays stubbornly the same. What else could this be but a malignant “cost disease” on our collective welfare. [Link]

The trouble with this explanation of the cost disease is that, while it gets some of the basics of the argument (not metaphor) right, it has attached Horton’s normative beliefs (and anti-economics prejudices) to it. No economist has ever declared that “health is bad for you” or that this argument leads to the conclusion of a “disaster for society”. The main conclusion is that while there is economic growth, stagnant sector services like health care will take up a greater and greater proportion of national income, but national income will grow at least as fast in size. Baumol makes some other claims that Horton may wish to engage with as they have important consequences for access to health care:

  1. the cost disease will disproportionately affect the poor as healthcare services become more unaffordable,
  2. misinterpretation of the cost disease will lead to suboptimal policy (as we are seeing in the UK with significant underfunding),
  3. the private sector is liable to the same problems.

Matthew Bishop argues that economists should engage with those who know nothing of economics as a “worthy interlocutor in a way that values his opinion”. But as another blog argues, there is a difference between “the man who genuinely wants to learn more, and the one who is loudly spouting nonsense for political reasons.” One hopes that Horton is the former, but his previous output might suggest otherwise.


Chris Sampson’s journal round-up for 26th September 2016

Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot. If you’d like to write one of our weekly journal round-ups, get in touch.

Health economics as rhetoric: the limited impact of health economics on funding decisions in four European countries. Value in Health Published 19th September 2016

We start on a sombre note, with a paper that begs the question: why do we bother? A key purpose of health economic evaluation is to prevent the use of low-value, high-cost technologies. Influence on funding decisions is arguably a good basis on which to judge the impact of health economics. This study looks at funding decisions in England, Germany, the Netherlands and Sweden. The paper identifies key features of the HTA institutions and processes in each country. For all countries, there is very little evidence of economic evaluation having been the basis for the restriction of high-cost drugs. England found ways to support the funding of drugs for multiple sclerosis and cancer, despite high-cost and apparent low value. One positive impact might be in facilitating the negotiation of reduced prices – for example, through NICE’s patient access schemes. While the different countries have quite different processes, they have produced similar decisions in practice. The authors suggest that, despite having had limited impact on the outcome of funding decisions, health economics has influenced the process of decision making and the language of health care prioritisation. In this sense, health economics has value in rhetoric, increasing transparency and rational decision making. It’s an interesting idea that I’d like to see developed further, as the authors only provide a limited discussion of it. Personally, I think some distinction needs to be drawn between ‘health economics’ – as identified in the title – and ‘agency-mandated health technology assessment’. While many readers of this blog might do the former on a daily basis, I’d bet not many of us deal in the latter. I certainly don’t. So there’s a lot of ‘health economics’ that can’t – at least not directly – be judged on the basis of funding decisions. Yes, high-cost drugs backed by money-hungry Pharma evade HTA defences. But what about the other end of the spectrum? What about high-value interventions that have been commissioned because the economic evidence has been so compelling. Wishful thinking? Maybe not. Either way, we shouldn’t understate the value of health economics as rhetoric when dealing with capricious and myopic governments.

Recommendations for conduct, methodological practices, and reporting of cost-effectiveness analyses: Second Panel on Cost-Effectiveness in Health and Medicine. JAMA [PubMed] Published 13th September 2016

What do you mean you haven’t yet pre-ordered the new edition of the ‘Gold’ book from the famous Panel on Cost-Effectiveness in Health and Medicine? The original Panel was a big deal (not that I remember it, of course, as I was 8 years old), and so, presumably is the Second Panel. Maybe less so as relative consensus has developed in the use of health technology assessment in practice around the world. But we still need guidance. It’s ironic that the Panel was convened and funded by US organisations in a country that lags far behind in its use of economic evaluation in health technology assessment. This article in JAMA outlines the Panel’s recommendations. I can’t summarise them all here, so you probably need to go and read it all yourself. But know that there isn’t anything radical or unexpected. This Panel updated the original recommendations and created new ones where necessary. Threatening the validity of many a joke at economists’ expense, the Panel was able to reach consensus on all recommendations. Readers are chastised for not appropriately adopting a societal perspective as recommended by the first Panel, but then we are offered a compromise: “All studies should report a reference case analysis based on a health care sector perspective and another reference case analysis based on a societal perspective”. The Panel also recommend use of an “impact inventory”. This is a nice suggestion and I like the terminology. Including a disaggregated list of costs (and outcomes) improves transparency and makes studies more useful to future researchers. One new recommendation is that we should include unrelated future costs, which is something we saw discussed in a recent journal round-up. Another departure from the first Panel is that we are told to include productivity costs in the cost side of our equation. A suggestion that’s dropped in is that protocols should be written in advance of a study. I wish the panel had been more forceful with this one, as published protocols could go a long way in improving consistency, transparency and quality.

The Load Model: an alternative to QALY. Journal of Medical Economics [PubMedPublished 7th September 2016

OK, I admit it: I went into this paper with a lot of scepticism. The QALY – that is, the combination of the quality and quantity of life – fundamentally makes sense. I’m not sure we need ‘an alternative’. The paper introduces some interesting ideas, but they aren’t as revolutionary as the author suggests and I’m not sure that it gets us anywhere. There are some problems from the outset. The article jumbles up positive and normative matters, criticising the QALY on the basis of its capacity to indicate what we might consider to be inequitable results. The author hints that the need for a new model derives from the QALY’s inappropriate combination of quality and duration of life. The most obvious criticism is that the constant proportional trade-off assumption does not hold. But then there’s no discussion of CPTO. The Load Model is presented as “radically different”, but it isn’t. Equations are shuffled so that we’re dealing in rates rather than time, but this adjustment appears to be inconsequential. It might be a more useful way to think about morbidity and mortality, but no argument to that end is presented. The main difference in the Load Model is that a ‘load’ is added for the negative impact of death (as opposed to being dead). Now, I have big problems with the way we handle ‘dead’ in health state valuation. I think it’s a more serious issue than we know (and we know quite a bit), so I am always glad to see attempts to fix it. Once you get past the superficial adjustments to the QALY, what’s really going on is that the Load Model is adding a third dimension to the valuation process; in addition to length of life and quality of life (in the Load Model it’s disease burden) we also have quality (or rather the burden) of death. But this could be incorporated into a QALY framework; I’ve spoken before about the notion of a 3- or otherwise multi-dimensional QALY. Given that death is so key to the distinction between the Load Model and the QALY, it’s unfortunate that in the worked example an entirely arbitrary value of questionable meaning is attributed to it. So the subsequent comparison between the two approaches seems meaningless. There may be more merit in the Load Model than I can see – perhaps I lack the immagination. But it seems to solve none of the problems associated with the QALY framework, while introducing new ones.

Associations between extending access to primary care and emergency department visits: a difference-in-differences analysis. PLOS Medicine [PubMedPublished 6th September 2016

We’ve had quite a bit of discussion of 7 day services here on the blog. But the papers continue to flood in, much to the chagrin of Jeremy Hunt. This study doesn’t look at the most controversial case of extending hospital services, but investigates whether extended (evening and weekend) opening of GP practices reduces hospital attendance. The context is that providers in Manchester (England) were invited to bid for funding to roll out extended hours from December 2013. In total we’re looking at 56 practices who succeeded in the bid and 469 practices who provided services as normal. The analysis uses routinely collected hospital administrative data for almost 3 million patients from 2011 to 2014. A difference-in-differences OLS regression was used with propensity score matching to try and deal with the obvious selection problem. Of course, there was an increase in the number of GP visits: 33,519 in total. The main finding is that patients registered at practices with extended hours exhibited a 26.4% relative reduction in attendances for minor problems at A&E. So in this sense, extending opening hours seems to have satisfied its purpose. Though each emergency attendance ‘avoided’ corresponded to around 3 additional GP appointments. Unfortunately the study wasn’t able to determine the set-up and running costs of the extended GP services, so couldn’t carry out a proper cost-effectiveness analysis. And as we’ve discussed before in this context, that’s the question that really matters.


Meeting round-up: EuroQol Plenary Meeting 2016

The 33rd Plenary Meeting of the EuroQol Group took place in Berlin on 15th and 16th September 2016. The meeting was hosted by Wolfgang Greiner of the University of Bielefeld. I chaired the Scientific Programme together with my co-chair Anna Lugnér.

Inspired by the HESG meeting, the EuroQol Plenary Meeting largely followed a discussant format whereby papers were pre-circulated to participants and presented by discussants rather than by authors. The parallel poster sessions also followed a discussant format, with approximately 10 minutes dedicated to the discussion of each poster. In total, 20 papers and 22 posters were presented at the Plenary Meeting, about half of which were lead-authored by non-EuroQol members.

As with previous Plenary Meetings, there was a strong focus on health state valuation issues. Three papers examined the extent to which the results of discrete choice experiments are influenced by the visual presentation of the choice tasks. Two other papers explored innovative methods – namely, ‘personal utility functions’ and ‘non-iterative time trade-off’ – that have been developed to overcome some of the biases and limitations of traditional stated preference techniques. Other papers of interest included a study by Nils Gutacker and colleagues in which a web tool was developed to present EQ-5D data to patients and GPs in order to facilitate shared decision making, and a comparison of seven new EQ-5D-5L value sets by Jan Abel Olsen and colleagues. One of the highlights of the poster sessions was Katherine Rogers et al.’s report of the translation, validation and reliability of the EQ-5D-5L in British Sign Language.

An exception to the usual discussant format was a debate about the use of public, patient and experienced-based values. Matthijs Versteegh, whose paper featured in a recent blog post, set out arguments in favour of using patient values in addition to general public values, and presenting two different ICERs to decision makers. In response, John Brazier pointed out some of the potential problems with Matthijs’s proposals. John argued instead for using ‘informed’ general public values or for amending the EQ-5D descriptive system to reflect more fully the experience of patients.

The Plenary Meeting concluded with a reception and dinner at a restaurant on top of the magnificent Reichstag (German Federal Parliament) building. Look out for the call for abstracts for next year’s Plenary Meeting, which will be posted on the EuroQol website in Spring 2017.