Healthcare Resource Allocation

David Hadorn, MD, Ph.D

University of Otago

Wellington School of Medicine

27 September 2010

Healthcare Resource Allocation

• Definitions

• Oregon as case study

• NZ experience and current activity

Definitions

• Resource Allocation – implies differential value to be maximised

• Rationing – implies fairness, restricted portions, limitations on services

• Prioritisation – implies ordering effect with some services falling below threshold

Oregon

• Legislation passed in 1989

• Designed to set priorities amongst all health services for use in Medicaid

• Philosophy was (and remains) to drop services, not people, when funding gets tight

• Still going strong today, with waiting list

Oregon, cont.

• Health Services Commission develops prioritised list

• Several hundred ‘line-items’ (condition-treatment pairs)

• Legislature sets funding level • Actuaries translate this into a funding threshold

on the prioritised list• Service threshold is specified (currently 503 /

680)• Services below funding threshold (nominally) not

covered

In more detail…

Oregon

• First list developed 1990 using classical CUA ($ / QALY)

• Priority order seemed obviously wrong

Result of First CUA

History of Prioritisation in NZ

• Core Services Committee 1992

• Gave up task of defining ‘the core’ in 1996 (too hard, too controversial, Oregon)

• HFA took over prioritisation efforts 1997-2000

• Since then, little progress on national systematic prioritisation – some DHB work

• PHARMAC has kept going strong

Current HVDHB Scoring ComponentsScore Maori Health Criteria Score Effectiveness Criteria Score Equity Criteria Score Value-for-Money Criteria

1 No targeting for Maori, mainstream service

1 No expert evidence 1 Untargeted service

2 Little targeting to Maori (e.g. targeted to low income), mainstream service

2 Conflicting evidence but recommended by Service Planning Groups

2 Untargeted service but with relatively high proportions of those with the poorest health and highest need

3 Mainstream service targeted to Maori

3 Some evidence or expert consensus

3 Some targeting to those with the poorest health and highest need

Scored on 4 separate dimensions below

4 Maori service 4 Good international evidence or well designed controlled trials

4 Generally targeted to those with the poorest health and highest need

5 Fully by Maori for Maori service

5 Good New Zealand evidence or randomised control trials

5 Targeted specifically to those with the poorest health and highest need

Value-for-Money dimensions

Score Cost per Person Criteria Score Cost Savings Criteria Score Effectiveness per Person Criteria

Score Timing of Benefits Criteria

1 >$10,000 per person 1 Little or no cost offsets 1 Little, if any, direct gain 1 10+ years2 $1,000-$10,000 per person 2 Small cost offsets 2 Some benefits, small

reduction in disability or small increase increase in quality of life

2 6-9 Years

3 $100-$999 per person 3 Medium cost offsets 3 Medium benefits, moderate reduction in disability and/or some increase in quality of life or life expectancy

3 3-5 years

4 $10-$99 per person 4 Large offsets 4 Large benefits, good reduction in disability and/or increase in quality of life or life expectancy

4 2 years

5 $0-$9 per person 5 Very Large cost offsets 5 Huge benefits, adding many years of quality life

5 Within 1 year

10% Weighting 5% Weighting

25% Weighting 35% Weighting15% Weighting 25% Weighting

15% Weighting 5% Weighting

Ranked Table of InitiativesPrioritisation Scoring Table - With Weightings 15% 25% 25% 0% 0% 15% 5% 10% 5%

Plan Proposal/Initiative Score MaoriEffective

ness EquityConsist w

NZHSAcceptabi

lityCost per person

Cost offsets Outcomes

Time to effectiven

essDiab/Card Diabetes Pilot prevention 78 9 20 25 0 0 9 4 8 3Primary PHO JV 68 9 15 15 0 0 15 3 6 5Card Card rehab Prog 68 9 20 15 0 0 9 4 6 5Child Kidznet 64 9 10 20 0 0 15 3 4 3Youth Youth School Health Clinics - targeted 65 6 15 20 0 0 12 2 6 4Cancer Cancer mole removal subsidy 74 3 25 20 0 0 9 4 8 5Chronic Dis Chronic Dis Clinical Pathways in Primary care 65 9 15 20 0 0 9 3 6 3Child Immunisation assertive outreach 72 9 15 20 0 0 12 4 8 4Health Comm Lifestyle - CHW via targetted PHO 66 9 10 25 0 0 9 3 8 2Health Comm Smoking Cessation 69 6 20 20 0 0 6 5 10 2Primary Primary care teams - Additional Nurses 62 6 15 15 0 0 15 2 6 3Youth YHS to older youth 61 9 15 15 0 0 12 2 4 4Child Ear Caravan 68 9 15 20 0 0 12 3 6 3Health Comm Physical Activity - Market Green Scripts 62 3 20 10 0 0 15 3 8 3Oral Pilot Basic dental service 69 9 10 25 0 0 12 2 6 5Primary Primary care reduce copayments -Targeted 66 12 10 20 0 0 12 2 6 4Youth Youth School Health Clinics 53 6 15 10 0 0 12 2 4 4All Service Directory 46 6 5 10 0 0 15 1 4 5All Audits - additional 67 9 20 15 0 0 15 1 4 3Diab Increase Podiatry Service 66 9 20 15 0 0 9 3 6 4Disability Disability Advisor 52 3 10 15 0 0 15 1 4 4Maternity Additional post natal support -special needs 63 6 15 20 0 0 9 2 6 5Resp Flu Vac assert recall 65 3 20 15 0 0 12 4 6 5Surgery Increase Nurse clinics Card & ED 53 3 15 10 0 0 12 3 6 4Youth Peer support /educators 50 6 10 10 0 0 12 2 6 4All Workforce development fund 62 9 15 15 0 0 15 1 4 3Health Comm Ethnicity Collection 68 12 15 20 0 0 15 1 2 3Child Workforce development - well child 47 6 10 10 0 0 15 1 2 3Oral Oral Health enrol adolescents w default prov 60 9 10 20 0 0 12 1 4 4Maternity Maternity coordination mechanism 55 6 15 10 0 0 15 1 4 4Youth Youth Health Coordinator 37 3 5 5 0 0 15 1 4 4Child Mental Health Moderate needs pilot 44 6 10 10 0 0 9 1 4 4Surgery Surgery Diagnostics - Radiology 41 3 10 5 0 0 12 2 4 5Health Comm Workforce Study 37 6 5 5 0 0 15 1 2 3

Mental Health

Mental Health Psychological therapies 63 6 20 15 0 0 9 3 6 4Mental Health MH Quality & Outcomes program devel 64 6 20 15 0 0 15 1 4 3Mental Health Youth crisis respite services 45 6 10 10 0 0 6 2 6 5Mental Health MH Aged Care 50 3 15 15 0 0 6 1 6 4Mental Health Workforce development - MH Scholarships 55 9 10 15 0 0 15 1 2 3Mental Health Primary Mental Health long term stable 41 6 10 10 0 0 6 1 4 4Mental Health Outsource MH link Newsletter 36 3 5 5 0 0 15 1 2 5

National Prioritisation Back on Agenda

Renewed government interest in prioritisation signaled through series of Wellington Health Economist Group seminars:

Gerald Minnee, Ruth Isaac, NZ Treasury. Health system sustainabilityin the long term: Why we need to act today. 22 May 2008

Judy Kavanaugh, MOH. Prioritisation: why is it so hard? 21 August 2008

Janet McDonald. Prioritisation: Change and Adaptation in Familieswith Young Carers. 11 September 2008

David Hadorn and Martin Hefford. Saying ‘no’ in three countries:alternative methods of healthcare prioritisation. 16 October 2008(repeated at VUW and Treasury)

Creation of Centre for Assessment and Prioritisation July 2009

“Meeting the Challenge”

• Ministerial Review Group (MRG) – Horn Report

• Released 16 August 2009

• Changed dynamic for health reform

• Several recommendations support CAP’s mission

MRG on prioritisationFrom MRG report:

[We recommend] revamping and strengthening the National Health Committee, so that it is better able to perform its original role of assessing the appropriateness and cost-effectiveness of new services, and progressively reassessing existing services. p 5

[A] single national agency removed from both DHBs and the Ministry [is needed]. The best approach would be to strengthen the NHC. p29 sec72

Cabinet Paper

• “[MRG] identified improved prioritisation as way to manage costs and improve safety and effectiveness of health services, as has been achieved by PHARMAC with respect to community pharmaceuticals. This requires smarter control of the introduction of new technology and interventions . . . while decreasing the utilisation of less effective and outdated services.”

Cabinet Social Policy Committee, Improving the Health System: Further Elements: Paper One: Prioritisation of New Technologies and Interventions, 19 March 2010

Decisions Yet To Be Taken

• Cabinet has embraced MRG’s main recommendation but still has to decide

• (1) how NHC should select and assess interventions

• (2) whether and how NHC decisions should affect or constrain District Health Boards’ funding decisions, and

• (3) whether and how groups of similar products and services (e.g., new technologies, devices, diagnostics) might be ring-fenced and subjected to a fixed budget, PHARMAC-style.

Minister at Arms’ Length from Process

• “risk” of becoming “directly [involved] in detailed and potentially sensitive decisions . . . [including] establishing the work programme, which may also be contentious.”

• “can create PHARMAC-like budget arrangements to place Minister at arms length from the decisions”

• OTOH Minister must retain ability to veto output in capacity as elected representative

• But make it difficult to veto, like PHARMAC

Treasury is Cautious

• Treasury cited these issues as reasons to ‘defer’ development of a prioritisation infrastructure (despite Minister’s expressed wish to begin “as soon as possible” with consultation to run alongside):

“Deferral would enable the decisions to be taken further in terms of how prioritisation will in fact work and how any prioritisation recommendations will be implemented (crucially, how it will or will not constrain DHBs). These design details matter, as there is a risk of fuelling, rather than dampening, health cost pressures if the model is wrong.”

How Should NHC Advice Bind DHBs?

• Don’t want to force DHBs to purchase services deemed high priority (like NICE in UK) or to invest or disinvest in same services (accept some disparities as price for local control)

• Give DHBs options for new investments and disinvestments – balance costs

Proposed Prioritisation Method:

• National Health Committee would use “Traffic Light” approach

• Combines central assessment and prioritisation with local choice

• Using Cabinet-approved methods, including consultation, National Health Committee would develop three lists: green, orange, red

• Green = good new investments (new technology or expand existing)

• Orange = good candidates for disinvestment, i.e., marginal value for money

• Red = indications for which services should not be performed or funded (zero or negative net benefit)

Proposed method, continued

• Cost of green list = cost of orange + red lists – compatible with fixed budget

• DHBs permitted to choose amongst designated services based on local considerations

• Could go ‘off list’ but would be asked to explain why to Minister