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Why Health Economics For COVID-19 Matters

To date, the field of health economics has been largely missing from this growing literature, yet it is an essential piece for evidence based decision-making. We discuss in this piece in which ways health economics can help decision-makers, and why health economics research and use needs to be scaled up.

The COVID-19 pandemic has created pressures to produce rapid research to inform policy and created a newly emerging field., a repository of COVID-19 research, found over 39,000 research papers are indexed COVID-19. Hundreds of articles are being published every day since the first months of the outbreak. This does not even cover the huge number of grey literature, reports and news articles written in discussion of the outbreak.

Research on COVID-19 has already boasted many successes by equipping governments around the world with evidence on how to mitigate the impact of the epidemic. One example is the research into vaccine development, which is progressing faster than for any pathogen in history. Another example is the development of many local, country and regional epidemiological models to forecast the number of cases and casualties, or analyse different policy scenarios. Likewise, global bodies, government and academics are beginning to better understand the economic impact of different COVID-19 policies.

To date, the field of health economics has been largely missing from this growing literature. Health economics is concerned with the allocation of resources within and to health services. The field examines issues such as how to best finance health services, and how to decide whether to invest in new technologies such as vaccines. Health economic analysis is often institutionalised in policy processes such as health technology assessment.

The response to COVID-19 requires governments to develop and evaluate a vast number of policies and guidance to protect the health and welfare of their populations. This includes allocating resources to equip hospitals to best care for patients and protect their workers, making decisions on the opening and closing of parts of society, or investing in vaccine development or production. Such decisions should adopt a ‘whole of society response’ to the outbreak, carefully considering the benefits and costs trade-offs between different policy options and across disease areas (and perhaps with the wider economy), and ideally should be based on sound evidence. Health economics research can play a pivotal role in shaping countries’ COVID responses. Our newly launched C19economics site aims to play a part in that effort, but supporting the community working in the health economics produce COVID-19 analyses, by providing resources, and facilitating networking among analysts, researchers and policy makers.

Health economics: a small introduction

The field of health economics is concerned with the application of economic theory, models and empirical methods in the field of healthcare. For the last decades, health economists have been working, among other topics, on how to best allocate resources in the healthcare sector, among alternative uses, and under budget constraints.

For instance, cost-effectiveness analysis, one prominent area of research within the field, assesses the benefits of alternative interventions against the resources incurred in their production.

Cost effective analysis reasoning
Figure 1 Cost effective analysis reasoning             Source: Kernick, 2002

This is important because the health budget (private, public domestic or external) is not unlimited, and as a result, resources committed to one intervention are no longer available to fund alternative interventions, which may have produced better results. This is known as the ‘health opportunity costs’ associated with each decision. Comparing interventions in terms of their cost and benefit is therefore crucial to decision-makers to ensure that resources are allocated to produce the most health impact.

Health benefits/effectiveness is only one aspect of ‘impact’ though. During pandemics, societies and decision-makers are also concerned with other aspects such as distribution of health across societies (equity) or financial protection, and the broader societal and economic impact of intervention.

How health economics supports decision-makers planning their COVID response

As we have seen in the past few months, responding to the pandemic requires planning for resources and involves trade-offs. As a result, health economists are well placed to guide decision-makers in choosing how to best allocate resources to best respond to the pandemic, and to understand the opportunity costs associated with different policy scenarios. Does intervention A averts more the deaths or Disability Adjusted Life Years (DALYs) than intervention B? How much should I allocate to scaling up testing in my country? In Low- and Middle-Income Countries (LMICs), health budgets pre-COVID were already overstretched, those questions will be particularly important. In 2017, the current health expenditure in 10 countries was less than than $30 per capita (according to the WHO GHED database). If those health systems were struggling to cope with the provision of basic, life saving and cost-effective essential services; then the funding of COVID-19 interventions may come at the expense of other interventions in the healthcare system. This “crowding out” has already been been documented extensively in previous outbreaks and in this one too.

The development and facilitation of health economics evidence allows for trade-offs within the COVID response, and within the health sector, by making opportunity costs of alternate paths explicit. Health economics can also assist decision-makers in the trade-offs between health and other sectors (of the economy). We give a few examples of how health economics can support decision-makers in this outbreak.

  • Managing the health sector response: This is probably one of the most ‘developed’ health economics question of the outbreak (see resources here). The Kenya Medical Research Institute (KEMRI) costed the treatment of COVID patients in Kenya to help the healthcare system plan for the inputs required for clinical case management, their quantities, and their costs. A study conducted in South Africa looked at the cost-effectiveness of public health strategies in the country, and concluded that contact tracing, isolation and mass symptom screening would be cost-effective; while adding quarantine centres was not.
  • Considering trade-offs within the healthcare sector: If research into the costs and the effectiveness of COVID interventions was conducted using common metrics to all health conditions such as DALYs or Quality Adjusted Life Years (QALYs), we could compare COVID interventions to other health sector interventions. This could allow, in principle, making trade-offs between funding COVID and other disease areas explicit; however, at the moment there is virtually no studies that can allow decision-makers to adopt this ‘whole of health approach’ [ref to Anna’s paper].
  • Considering trade-offs with the wider economy: Early research into HIV looked at the macroeconomic impact of the epidemic. Health economists have also attempted to reflect those through the adoption of a societal perspective to cost-effectiveness models (i.e., including the benefits and costs outside of health, e.g. work absenteeism or benefits and costs of public measures). Attempts to bring together health and trade-offs in the wider economy has also applied an approach using the Value of Statistical Life (VSL), which converts health into a monetary value, making it possible to then compare it with costs across sectors.
  • Considering the health and economic impacts of non-pharmaceutical interventions (NPIs): since the beginning of the outbreak, disease modellers have worked tirelessly to develop epidemiological models to predict the potential spread of COVID-19 in countries based on different policy scenarios. The field of health economics has a long history of using modelling and economics, which can be utilised to assess the health and economic impacts of such policies. For instance, this piece analyses the costs and benefits of the lockdown in the UK. Again, this allows decision-makers to articulate explicitly the trade-offs of each of the scenarios.

This list is obviously not exhaustive. Health economics could also be used to look at some of the behavioural aspects of the response (e.g. how to encourage people to adopt risk minimizing lifestyles as effectively as possible) or to inform redesigning of other healthcare services to accommodate for COVID.

Why we urgently need health economics research to be scaled up

While we have found many instances of decision-makers discussing the use of epidemiological models, the mention of health economics is a lot more sparse, and there is risk that decisions trading-off different health services, services to different populations and more broadly between health and economic welfare are not transparently and impartially rooted in the emerging epidemiological, economic and clinical evidence.

President Cyril Ramaphosa: “Scientists and other scenario planners have presented us with models that project that South Africa may have between 40,000 and 50,000 deaths before the end of this year,’’

Source: quote: Anadolu Agency , photo: the conversation

We need health economics to make sense of the costs and impact growing number of possible interventions, investments, and in general course of action (including NPIs) available to countries. One example is the vaccine development: there are currently more than 200 vaccines registered, that employ different technologies and approaches as shown in this tracker. The increasing availability of different testing products and approaches, oxygen supply optionsanti-viral candidates (notably dexamethasone and remdesivir)  or even post-exposure prophylaxis is now [fortunately] increasing the options available to decision-makers in their response planning. A systematic and sound approach to considering those options should be part of a transparent and inclusive decision-making process that is accountable to the public for using best available evidence.

We urgently need to strengthen national and local decision processes, data and evidence that accounts for the wide differences in cultural and societal characteristics (e.g. on compliance, transmission risk, age, composition of households) , health systems constraints (e.g., staffing, equipment, resource constraints), disease burdens, societal preferences; as well as policy questions (which will be different from one setting to another). Our newly launched site aims to support these efforts to be scaled up at national and local level, enabling health economists based in countries to produce COVID-19 analyses; and encourage this community of practice to work  together on common challenges and problems.