Cost-effectiveness vs. universal health coverage. Is the future random?


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I've been blogging a bit about Universal Health Coverage (UHC) recently. In my "old wine in a new bottle" post, I argued that UHC is ultimately about ensuring that rich and poor alike get the care they need, and that nobody suffers undue financial hardship from getting the care they need. In my "Mrs Gauri" post, I used my colleague Varun Gauri's mother as a guinea pig to see whether the general public feels that UHC is a morally powerful concept and whether it could be expressed in a way that the general public would find accessible.

My sense from Ms Gauri's comment on the post, is that the answer to both questions could well be Yes. So far so good.

Some bad news—resources are finite

But before we place orders for colorful placards and huge banners with my suggested slogans "Everyone should get the care they need!" and "End impoverishment due to health spending!", we should break some bad news to Ms Gauri and the rest of the general public: resources are finite, and especially in poor countries the available resources won't allow us to get to UHC anytime soon.

In fact, to be quite frank, even in rich countries, we may not get there—there will always be some needs that scarcity will prevent us from meeting. Sorry. That's a little blunt, I know. But it’s the truth.

Which raises the question: How should countries allocate their limited resources so as to get themselves as far toward UHC as they can?

In answering this question, let's make one requirement—that whatever method we come up with has to be feasible to operationalize and implementable at the point of use. Staff at a health facility have to have clear practical rules about what to do with each patient.

Why CEA is so compelling

One popular approach is to use cost-effectiveness analysis (CEA) to come up with a list of interventions (or "benefits package") that will be financed publicly. Patients needing an intervention not in the benefit package will have to pay out of pocket, or else go without it.

CEA can be operationalized with existing data on costs and effects of different interventions. In fact, we already have cost-effectiveness estimates for a large number of interventions, and in different settings. We can use these data to rank interventions in descending order of cost-effectiveness, estimate the number of people likely to need each intervention, and then keep adding interventions to the benefit package until the budget is exhausted.

CEA is also a rule that can be implemented at the point of use. Medical staff make the diagnosis, decide the appropriate intervention, see whether it's in the benefit package, and then break the good or bad news to the patient, who either gets the care for free, or gets out his wallet or heads for home untreated.

The big attraction of the CEA approach is that, of all the possible rules, it’s the one that will produce the maximum possible aggregate health for the population. So if we keep things simple and think of people as being either well or ill (and therefore in need of health care), applying the CEA rule will get the largest number of people well again.

That's pretty compelling. Not applying CEA will mean that some people could have been made well again with the existing budget but weren't.

Why UHC and CEA aren't happy bedfellows

But is CEA an attractive allocation rule if we're trying to pursue UHC? Of course we know that with limited resources we won't be able to achieve UHC. But is at least in the spirit of UHC?

Awkwardly for CEA, the answer is No.

If we use CEA to come up with a benefit package, we'll only get those people back into good health who have been “fortunate enough” to need a very cost-effective intervention, or whose private resources are large enough to enable them to finance a relatively cost-ineffective intervention. This group will likely include a disproportionately large number of relatively well off people.

By contrast, there will be another group of people who have had—through no fault of their own—the misfortune to get an illness that requires an intervention that's not very cost-effective (surgery, say). These people will either go without treatment, with all the unpleasant consequences—pain, disability, and perhaps death. Or else they will have to pay for it out-of-pocket, quite possibly pushing themselves and their family into poverty as a result. This group will likely include a disproportionately large number of less well off people.

Put bluntly, CEA isn’t going to help us get to UHC.

Is the future random?  

So what to do?

One thing we could do with limited resources is to give everyone the same chance of getting the care they need without suffering undue financial hardship. Ex post, not everyone needing care would get it, and if they do they might suffer from financial hardship. But we could try to ensure that, ex ante, everyone—rich and poor—faces the same probability of getting the care they need without suffering financial hardship as a result of receiving it.

Could a lottery approach to allocating scare health care resources be operationalized? And could it be implemented at the point of use?

With today’s information technology the answer has to be Yes. The government would need to get its actuaries to work out how many patients in an average month it could afford to give free treatment to, and what fraction of the population would require treatment. These calculations would determine the odds that any one person seeking care could be given free care. These odds could be updated more regularly than every month if necessary—for example, if new resources become available, of if an epidemic suddenly causes a spike in demand.

For each patient, the facility manager would need to submit a request for free treatment, and get a Yes or No back within minutes. The obvious way would be for this to be done electronically. It could even be a mobile phone or a handheld device that makes the request of a central computer. The facility would submit a code for the proposed treatment and the name of the patient. The central computer would provide a Yes/No reply along with an authorization number; the facility would submit this number to claim reimbursement for the treatment costs that it incurs and for which it does not ask the patient to pay. There would need to be a mechanism to prevent requests for the same patient and same treatment being made repeatedly in the hope the patient eventually gets a Yes.

Tweaking the lottery with a nationwide ID system and biometrics

If every citizen had a unique identification number, and their identity could be confirmed electronically through biometrics, repeated queries for the same patient and same treatment would be easy to tackle. India is introducing just such a system known as Aadhaar.

There are tweaks we could make, especially if we had a system like Aadhaar in place. The country could exempt the poor: individuals from an officially poor family would be identified as such once their biometric information is obtained at the clinic, e.g. through fingerprints or an iris scan. Other groups—such as children and pregnant women—could be added to the exempt category. Of course, for every person added to the exempt list, the government would have to reduce the odds of a nonexempt person getting free care.

We could also require that anyone who has started a long-term treatment for free be allowed to continue forever for free. And we could say that someone who started a long-term treatment but didn't get the care free initially could submit a second request for free care the following month, and the third month, and so on.

Another tweak would be to have randomly generated gradations of charges. So instead of generating a Yes/No answer, the national computer could randomly generate a copayment rate—the number might not be completely random, or it could be one of 0%, 25%, 50%, 75%, or 100%.

Blending randomness and CEA

Going down the lottery road would get us much further toward the UHC ideal.

But there would be a price to be paid in terms of lower aggregate health. We would make fewer people better—probably far fewer—than if we decided on who gets free care and who doesn’t on the basis of the cost-effectiveness of the interventions they need.

We could go some way to meeting this objection by giving patients needing very cost-effective procedures slightly better odds of drawing a low copayment rate than those needing cost-ineffective procedures. This would be a practical way to address the equity-efficiency tradeoff in health. It would be much more practical than the social welfare function approach I suggested nearly 25 years ago that continues to be popular (and just as impractical) today.

Building on modern information technology and blending CEA with randomization-at-the-point-of-use would allow us to balance our objectives of maximizing health and attaining the goals of UHC. Randomness can help us protect people who—through no fault of theirs—have had the misfortune to fall ill with a condition that requires expensive care.

The future may not be completely random, but in the name of fairness, shouldn’t it be a part of it?



Adam Wagstaff

Research Manager, Development Research Group, World Bank

May 07, 2013

Adam, I usually learn a lot and really enjoy your blogs. This one not so much. Surely you arent serious? Who or what ideas are you trying to poke? Or is your point that our life circumstances are so randomly assigned (by accident of birth) why not make randomness explicit?

Adam Wagstaff
May 08, 2013

Thanks, Joy. Yes, the idea is indeed that it's chance that largely determines whether we fall ill and what intervention we need when we do. Using CEA to allocate scarce public funds means that less well-off people are fine if the intervention they need is on the benefit package, but not otherwise. Introducing randomness into how much someone pays toward the cost of their care would help narrow inequalities in the likelihood of people being able to afford they need. And as I say, it doesn't haven to be completely random: we can adjust someone's odds upwards if the intervention they need is especially cost-effective. A.

Matthias Nachtnebel
May 07, 2013

"Resources are finite" is an indisputable statement. Never the less, it also implies a thinking "within the box"; as underlined by this blog-post our discussion around resource allocation revolves around a "fair" allocation of resources given everything else being unchanged. Personally, I perceive this as one of the major shortfalls of the current debate around UHC- "where is the thinking outside the box", including a political discussion around (re)-distribution of resources? Are current inequities in the distribution of income and wealth acceptable and are our societies fair and just? And how would benefit packages and coverage look like in a society with (globally) more even distributions? Admittedly, quite a naive but never the less important question.

Por Ir
May 07, 2013

Dear Adam,
Thanks for sharing more ideas on how to go to UHC. In my response to your previous blog post "How to fill "quality" wine in the bottle?" I touched some of the issues you are discussing now.
I fully agree with you that CEA will not help us effectively move to UHC if we consider UHC is a process of "increasing access and financial protection without deteriorating equity". In addition to the absence of equity consideration in CEA, measuring cost-effectiveness of one intervention against another may be hardly possible, if not impossible, as the reality of the context is so complex with better health outcomes being contributed by many interventions (a combination of supply and demand-side interventions plus environmental factors), which are often necessary for low-income settings.
Your idea about computer-based randomization of entitlement to state subsidies for health care (or exemption from payment) at the point of use sounds interesting and innovative. It is clear that a computer-based "randomization" can be an alternative or implementation to "targeting or prioritization" which has been criticized for its exclusion and inclusion errors and associated cost. However, such randomization may undermine the principle of UHC: "pre-payment" and risk pooling. Giving entitlement at the point of use through such randomization is associated with a number of side-effects related to the so-called "uncertainty of entitlement", including inappropriate or cost-inefficient health seeking behaviors. Imagine what would be decision of an ill person who has no money and is not sure he will get free at an ideal health facility/provider. He would delay seeking care or seeking poorer quality care or forgo treatment. If he would seek care at that facility/provider and then fail to win the lottery, he then spends time and money to go there for nothing and also miss opportunity for get care early care. To be secure, this person may borrow money with high interests or sell assets before going to that facility/provider.
We have an explicit example of this lottery system in Cambodia applied by a charity hospital. They provide high quality free care to all people, and then they face over demand (e.g. everyday 200 people come for outpatient consultations while they can offer only 100). They then introduce a system of lottery. It works for the hospital, but causes a lot of consequences to patients. Everyday, over half of people, some coming from very faraway, fail to get a consultation, and some do so for many times. At the end, because of limited resources, the hospital leaders decide to open more clinics, but charging "fair" user fees from patients, which is to me not ideal, but a better alternative. I was also involved shortly in the discussion with the hospital leaders to find such solution.

Adam Wagstaff
May 08, 2013

Thanks, Por.
Interesting about the hospital that tried randomization, though of course in that case the budget constraint turned out not to be a hard one.
On the "uncertainty of entitlement" issue, yes but we we should remember the people who currently don't seek care at all (especially hospital care) because they know for sure they can't afford it, and people who do seek care and then get pushed into poverty because they had to pay for it in full. In my approach some people who don't currently seek care would be persuaded to do so because of the nonzero probability of getting it free, and some people currently pushed into poverty wouldn't be. Those are plusses.

May 08, 2013

UHC is false advertising. What you are taking about is universal DISEASE coverage. Ill person has " right" to get care to treat DISEASE and , nopefullly, as a result become healthy again.
If you were concerned about HEALTH for as many people as posiible, because of the " universal " term in UHC , you would argue for population wide prevention. Clean water and satitation. Safe roads and vehicles, surveillance systems. Laboratories. Etc. etc.
There was a good program on NPR a couple of days ago on environmental health. The magnitude of impacts on health status dwarfs by several orders of magnitude what UHC does to finance doctors and drug companies.
More than a billion people do not have access to food. Would the World Bank recommend to give out food randomly as well?

December 19, 2013

Universal health coverage as a concept is not about doctors and drugs (Although some people mistake it to be). All you are suggesting is what is entailed in a universal health system not just treatment/curative interventions but also prevention. The important link between UHC and socio-economic determinants of health is key to prevent other people from viewing it as false advertising!

Nir Eyal
May 08, 2013

Highly original stuff, Adam!
In my own view, ex ante distributions lack intrinsic worth, whether positive or negative. But even those who believe that they intrinsically matter would have to reject this modest proposal, for two reasons:
1. The difference between the most cost effective and the least cost effective interventions is enormous. As Toby Ord points out in similar contexts, Disease Control Priorities 2, perhaps our most authoritative source on the cost effectiveness of interventions in the developing world, shows 10,000 times differences between them. Even if you think that giving a chance to someone with a complicated condition is worth something, do you really think that it is worth 10,000 lives?
2. The people who will one day have complicated needs that require expensive solutions are not as yet identified. That could be ensured by including a “time-release” clause in UHC legislation, such that reforms would kick in only after a waiting period. Therefore, the real ex ante perspective is where we are now—unidentified. Behind the current veil of ignorance about future health needs, rational egoists would prefer maximizing their expected health or expected utility by opting for the reform that funds the most cost-effective interventions. They would not want their prospects compromised just so that some people, later to be identified as having expensive needs, then get a chance too. They are focused on the real ex ante perspective, and not on what is from their current vantage ex post.
So even from an ex ante perspective—which I reject—Adam’s (tongue in cheek?) modest proposal is anything but modest.

Adam Wagstaff
May 08, 2013

Thanks so much, Nir.
On your first point, as I say, it doesn't haven to be completely random: we can adjust someone's odds upwards if the intervention they need is especially cost-effective. The exact adjustment in odds for very cost-effective procedures can be decided by the policymaker. This allows a compromomise between pursuit of fairness and pursuit of maximum aggregate health.
On your second, I'm not convinced rightaway but suspect there's something here! Let me think about it.

Obioma Obikeze
May 11, 2013

Dear Adam,
Thank you very much for yet another unique expose' on UHC from you. I recall personally telling you - during the recent UHC conference at Harvard - of the way I enjoy reading your articles on issues like this given your use of some unique approaches to simplify matters that appear somewhat complicated. This is another vintage one from your stable. It made a great reading for me once more.
Best regards sir.

Dan Wikler
May 12, 2013

FWIW, a group of us who were working with a government in SE Asia on how to choose the few who would have access to a scarce resource - in that case, dialysis - proposed a lottery, at least to begin.
They rejected it out of hand on the grounds that few would believe that it had been fair.
Back to square one.

Richard Cookson
May 31, 2013

Lotteries are usually only proposed as a way of allocating scarce public resources in special cases, when there seems to be no other fair approach. For example, lotteries may be appropriate when citizens have equally strong needs or claims and there are no decisive reasons to choose one way or another. Or, as Peter Stone argued in his 2011 book “Luck of the Draw”, lotteries may be appropriate if they are the only way to prevent bad reasons from influencing decisions.…
In such cases, lotteries can help to achieve “horizontal equity” – the equal treatment of equals. In his provocative blog, however, Adam Wagstaff proposes lotteries as a general approach to healthcare resource allocation. Although I have come across this idea before, I have not previously seen it spelled out in such practical detail – and Wagstaff is to be commended for that. The basic idea is problematic, however, since some citizens have greater claims on public healthcare resources than others – for example, greater health care needs or, more controversially, a larger historical contribution to social insurance. Differences in healthcare needs or insurance contributions are often seen as good reasons for differential allocation of healthcare resources. Lotteries therefore violate the principle of “vertical equity” – the appropriately different treatment of people with different needs or claims on resources. Wagstaff’s proposed solution to this problem is to weight lotteries in proportion to people's claims - e.g. in proportion to cost-effectiveness, or need, or contribution, or whatever other source of claims. However, although a "claims-weighted lottery" can in theory deliver vertical equity “ex ante” (i.e. before the lottery is drawn) it will inevitably violate vertical equity “ex post” (i.e. afterwards). That is, lotteries would result in some people with greater needs for healthcare resources – the ones who are unlucky in the lottery – receiving fewer resources than people with lesser needs – the ones who are lucky in the lottery. So lotteries violate the fairness principle that health care should be distributed according to need rather than luck.
There are also powerful political barriers to healthcare lotteries. Policymakers dislike explicit lotteries - there aren't many votes in the campaign pledge "when elected, I will make decisions by tossing a coin". So do clinicians - if they had to implement patient level healthcare lotteries they would have considerable discretion to fiddle them by altering their diagnosis and reporting behaviour, and would face pressure from patients to do so. And patients dislike explicit healthcare lotteries most of all – especially those who are unlucky, and even more especially those who attribute their “bad luck” in the lottery to being too honest, too inarticulate, or too poor to persuade or bribe their doctor to fiddle the lottery.
If explicit lotteries were politically acceptable, one might expect to find them used already in cases of “horizontal equity” when people have equal needs and hence equal claims on resources – for example, in cases of allocating treatment for patients diagnosed with the same disease and needing the same treatment. But they are not. Rather, health systems typically use waiting times and waiting lists to ration scarce resources in this kind of case. There is thus considerable political resistance to use of explicit lotteries even in special cases where they can help to achieve horizontal equity and do not grossly violate the principle of “ex post” vertical equity. Things can of course change, and ideas can gain public acceptability over time. So this is perhaps an idea worth pursuing.... though more details are needed not only on the practical details but also on the philosophical underpinnings and the strategy for overcoming political resistance.
Richard Cookson, University of York, 31 May 2013

Bill Savedoff
May 19, 2014

Thought-provoking post, Adam.
It seems to me, though, that introducing explicit randomness is only necessary if people (in social decision process) prefer a lottery to some other version of randomness. In most countries, access to health care has significant randomness associated with where you happen to live, who you happen to know, and how you talk, act and look. The more interesting question to me in your post is whether the explicit lottery is better than a CEA approach. And here, you haven't convinced me precisely because of the way you explain CEA your blog. You wrote:
"By contrast, there will be another group of people who have had—through no fault of their own—the misfortune to get an illness that requires an intervention that's not very cost-effective (surgery, say)."
Exactly. Using CEA analysis both gets more health for the money and allocates resources based on whether someone was "lucky" enough to get a disease or illness with low CEA interventions. This seems fairer to me, even from a common sense perspective, than the explicit lottery approach.
(Small tweak in relation to the parenthetic note: some forms of surgery are extremely cost-effective!)