This is lesson 3.2.1, Measuring Costs. In the previous lesson, we briefly discussed an example of thinking through a health technology assessment and the costs and benefits involved with a treatment. In this lesson, we'll discuss the basics of measuring costs. First, it's important to understand why we care about costs. Well, in an economy with limited resources that means, the more resources that are used in producing healthcare, the less resources we have for producing other things. If we can identify technologies that produce the same or better results with lower costs, it means there will be more resources to use for other parts of the economy. So what do we mean by cost in a CEA CBA or CUA? Well, the most obvious example is prices, however, prices only exist if there's a competitive market, or in other words, if a product is able to be bought and sold. In a more general sense, the cost is the marginal cost, or opportunity cost of the resource. The way to think about this, is, the cost is the value, of the next best use of a resource. An example might be, time cost. So, the time spent watching this lecture is time that can't be spent doing something else, like watching a movie. Costs can generally be divided into two categories. Direct and indirect. Direct costs are any costs that are attributable to the drug or intervention being assessed. For example, the drugs, any tests, supplies, the wages of healthcare personnel and any costs attributable to medical facilities are direct costs. As you can see, direct costs are likely to have prices. Indirect costs are any cost that result from the use of the intervention but are not directly attributable to the intervention. Many indirect costs may not have prices associated with them. Indirect cost include travel time, any emotional effect, any caregiver time or effort. For example, all of the time a spouse may spend providing care for their spouse with Alzheimer's Is definitely a cost, but it's hard to attribute a price to the time and effort spent in giving that care. Now that we've discussed the two types of costs, we need to consider who's costs should be measured. There's a variety of costs that could be measured. And this is the same as thinking about whose perspective the technology assessment should be conducted from. Are there patient costs we're concerned about? Is it the hospital's costs? The doctor's or allied health providers', insurers', government, or society's costs? There's no one answer to this question. Rather, the intent or goal of the technology assessment helps to determine whose costs should be measured. Thinking through the types of costs for each of these potential perspectives, we may consider out-of-pocket costs or the inconvenience of treatment if we're considering patient costs. We may consider the cost of providing care or reimbursement amounts for providing that care if we're considering hospitals or doctors. From the insurer perspective the payments they make to providers and the costs of processing claims are costs that might be incurred. From the government perspective, the cost of paying for care, through Medicare or Medicaid, or the cost to other government services, such as bus services, that provide transportation, for elderly, or sick individuals. Or productivity measures, that assess how chronic diseases impact the amount of productivity at a state or local or national level may be considered. And from a societal perspective, we may be concerned with all of these types of costs. It's important to note, however, that whatever perspective is used in the technology assessment, whether it is one of these or more than one of these, we should not double count. In the first slide of this lesson, we talked about why we measure costs or why costs are important. Because there's limited resources in the economy. Another way to think about this is what a technology assessment would look like with only benefits. With only benefits in the technology assessment, we could understand which outcome was better than another. We would not be able to determine though what resources are used to achieve that outcome? In that sense we'd have no sense of the value of the benefits achieved. Consider the example of a new drug to prevent heart disease that has just been approved. Let's consider what insurers will want to know before they cover it. They may want to know the potential benefit. In other words, what's the expected patient population this drug will be used on, and how effective is it? But they'll also want to know the costs. If this new drug is only marginally effective, but costs hundreds of thousands of dollars, it may not be In the insurer's best interest to cover the drug. If on the other hand, the costs are very small, only a few dollars per pill, but the patient population is large. Insurers will be better off and may even save money by covering the drug because it prevents problems from heart disease in the future. After considering all these aspects to measuring costs, we can next summarize measuring costs into three steps. First, identify the types of resources to be included and the perspective the analysis will take. Is it from the patient's perspective, the government perspective, the societal perspective? And are we including indirect, or direct, or both types of costs? Second, measure the resources that were used. Third, place a monetary value on the resource measures. Sum those values and identify the total cost.
