The Economic Costs of NIDDM Thomas J. Songer Department of Epidemiology, Graduate School of Public Health, University of Pittsburgh, Pittsburgh, PA 15261, U.S.A.

I. INTRODUCTION

A current topic of interest to health planners, providers, and payers, among others, is the transition taking place in disease patterns around the world and the implication that this transition carries for future health-care needs. Omranl has specifically noted the epidemiologic transition in health disorders, whereby disease patterns have shifted from an infectious disease majority to a chronic disease majority in economically developed nations. In addition, Olshansky and Ault2 outline the evolution of a further stage in the epidemiologic transition; that is, the shift towards chronic diseases developing primarily among the aged. Non-insulin-dependent diabetes mellitus (NIDDM) is a chronic disease of some significance in many economically developed countries today. The total prevalence for persons aged 20-74 years in the United States, for example, was estimated at 6.6% from NHANES I1 data3 and has been increasing steadily over time.4 NIDDM occurs even more frequently among the aged and the minority ethnic groups of the United state^.^,^^ Morbidity and mortality associated with NIDDM are also considerable. A higher rate of macrovascular disease events has been noted among persons with NIDDM in comparison with non-diabetic controls,8 and premature mortality among individuals with NIDDM is markedly higher than that seen among similarly aged persons in the general populati~n.~,~ The impact of NIDDM in most developing countries is generally understated. There are a series of reports, however, from areas which

Diabetes/Metabolism Reviews, Vol. 8, No. 4, 3 8 9 4 0 4 (1992)

01992 by John Wiley & Sons, Ltd.

have recently undergone ”westernization” which suggest that NIDDM is a growing p r 0 b 1 e m . l ~ ’ ~ The burdens of NIDDM, then, might be expected to increase in the Third World in the future as many developing countries undergo further economic advancement. Recognition of the burdens of NIDDM and the realization that they may be growing in both economically developed and developing areas have stimulated interest in reducing the incidence of NIDDM and its complication^.'^'^ The means of achieving this aim, however, are under debate. Should treatments for NIDDM be made more widely available? Should screening or prevention programs be more commonplace? What target populations should receive priority? The appropriate answers to these questions, among many others, are not readily apparent. One major reason for this lack of information is that we know little about the effectiveness of many treatments for NIDDM, the effectiveness of screening, or the effectiveness of prevention programs with respect to improving health in large populations. In order to intervene for disease prevention or control in large population groups, it is important not only to understand the biology and the epidemiology of the disease, but also to have an effective means of realizing prevention or control. There certainly is evidence that healthcare treatments (surgery, antibiotics, etc.) and preventive public health programs (concerning better sanitation and immunization) often improve health. The issue of health improvement, as it relates to NIDDM and those at risk for NIDDM, however, remains unsolved. It is clear, nonetheless, that the evaluation of effectiveness will be necessary at some point in any selected course of action.

390

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In the light of rising health-care costs and limited health-care resources available in most parts of the world, the task of reducing chronic diseases, such as NIDDM, will also require some assessment of the costs and economic efficiency of any respective actions. Health economics is a scientific discipline concerned, in part, with evaluating cost, efficiency, and equity (fairness) issues. More broadly, it may be defined as the study of scarcity (limited resources) and the choices made in the health-care setting. A number of economic methods have been designed to evaluate efficiency, cost, equity, incentives, and other issues. This review focuses on some of these basic concepts in health economic research and how they have been applied to issues involving NIDDM.

11. HEALTH ECONOMIC RESEARCH

A. Background: Economics, Health, and Health Care Health economic research is a relatively recent discipline of study, most investigations having been published only within the last 30 One report has suggested that this trend is due, in part, to a similarly timed recognition that health-care costs were extensive and growing.20 The origin of health economic strategies derives principally from general economic theory and application. This makes sense, logically, as economic decisions play a role in many aspects of life, including health.18 Indeed, health and economics may be viewed as mutually dependent. The general health of the population, for example, may be tied to the economic development of the country. Economic development has been associated with distinct disease patterns throughout the epidemiologic transition. Many diseases are linked to poverty and the poor sanitation, poor housing, poor nutrition, and poor health services which accompany it. Similarly, health can influence economic progress.l8fZ1The argument has been advanced that a healthy population is a productive population (i.e., people cannot work if they are not healthy). Chadwick went one step further, arguing that investments in public health actions (better sanitation or prevention) are good investments because they ultimately improve health and subsequently productivity.18,22 Health-care services and technologies are one

means by which health may be provided to a population. Decisions regarding the amount (quantity) of health services or technologies (production) and how to make them available to a population (distribution) fall within the realm of economic science. In theory, economic markets for health-care services exist based on the principles of consumer demand, health-care provider supply, and price. The mechanisms of the market, then, will ultimately decide what gets produced and how it is distributed. The relationship between health services, health, and economics, however, can be quite complex. Suffice it to say that, in practice, the economic market for health-care services often fails. A number of reasons contribute to its failure. Firstly, there is often limited competition in health-care provision (the number of hospitals in a community is usually limited or the number of physicians educated is limited). Secondly, the public is usually not well-informed on healthcare choices and risks. Thirdly, the presence of insurance lowers the price for health care and may affect consumer demand. Lastly, inequities exist where some individuals may be left with no or limited access to health-care services. Thus, a free market does not readily exist for healthcare services and governments often intervene to correct resulting weaknesses. Full details on the workings of economic markets in the health-care setting are available e l s e ~ h e r e . ~ ’ ~ ~ ~ ~ ~ ~

B. Health Economic Approaches Specific to Disease The intervention of governments in the health-care setting has created, in part, a need for economic information to describe, explain, and evaluate health-care services and how they relate to health, in general, or to specific diseases. These data are important, ultimately, for healthcare planning, provision, financing, and policy. There are a number of health economic practices that have direct relevance to diabetes planning, prevention, and policy (Figure 1).These practices include descriptive studies of the cost of diabetes, evaluative studies of the cost-benefit, cost-utility, or cost-effectiveness of diabetes treatments, and studies on how economic factors (demand, supply, incentives, etc.) may explain the behaviors of patients and health-care professionals towards diabetes care. Studies on the economic costs of diabetes show the amount of resources that are used or

ECONOMICS AND TYPE I1 DIABETES Descriptive Approaches

391

1. Descriptive Approaches

Cost-of-Illness studies Pdtient Costs and Concerns

Evaluative Approaches Cost-Benefit Analysis 0

Cost-Effeztivencss Analysis

0

cost-utility Analysis

Explanatory Approaches Incentives

Demand Supply

Figure 1. Health economic approaches used to study disease.

lost due to diabetes. Knowledge of these costs may potentially assist governments and healthcare organizations in the allocation of resources to diabetes-related activities and the management of available assets for the control of diabetes and its socio-economic burdens. Such studies can also provide baseline data for evaluating subsequent policy, reimbursement, health-care practice, or technology changes. Cost-benefit, cost-utility, or cost-effectiveness studies pertaining to diabetes show the costs of a diabetes intervention program or treatment relative to the benefits obtained from that program or treatment. Comparisons of these costs and benefits with a standard (such as the current treatment practice or an alternative treatment) are made to provide information meaningful to decisions on the future direction of treatment or on the efficient use of resources. Surveying supply, demand, and incentive issues pertaining to diabetes care can provide some explanation for the health-care behaviors observed among individuals with diabetes and the practice behaviors of those professionals who treat them. Economic incentives, for example, may affect individual behavior by affecting the price of health activities or services. Incentives to lower the price of "healthy" activities may increase the chance that this activity will take place. Understanding the influence of economic factors, such as supply, demand, and incentives, can be beneficial for policy-makers when programs for diabetes control are being developed. Further review of the status and meaning of these economic approaches to non-insulindependent diabetes mellitus follows.

(a) The costs of illness

Estimating the economic burden of diabetes or NIDDM is one approach in which health economic research may be applied. As it stands now, costof-illness estimates have been the most widely used health economic approach in diabetes research. What is involved in estimating the cost of illness or NIDDM, however? The costs of illness are usually subdivided into two main categories: the direct and indirect costs of disease (Table I). Direct economic costs of disease (NIDDM in this case) include the expenditures for medical care and treatment of the illness (emergency assistance, hospital care, physician services, longterm care institutions, equipment, facilities, overhead, etc.). The direct costs related to health-care utilization can be determined, in part, from healthcare statistics and surveys, Indirect economic costs include the societal costs of morbidity, disability, and premature mortality. The most common indirect cost item examined in the past has been the economic value of time lost from work. Considerable debate, however, has surrounded the method in which a monetary value can be assigned to this cost. Further discussion on this issue will follow later. A third category, the intangible costs of illness or the psychosocial costs of illness, is often mentioned as another dimension, but usually is not included because of the difficulty in measuring these costs. Psychosocial costs may include the cost of pain and suffering, among other items. Discussions and further details on direct, indirect, and intangible costs of illness and their measurement are detailed elsewhere.2527 Derivation of cost-of-illness estimates. A look at the method underlying cost-of-illness studies may permit one to understand more completely the estimates derived from cost-of-illness studies. Previous studies have used basically two computational methods to determine the direct costs of disease: a "topdown" procedure and a "bottom-up" procedure.28 The "topdown" computational procedure has served as a guide for the majority of cost-of-illness studies.29 The "bottom-up" approach, however, offers more detail and specificity to studies addressing individual diseases and treatments.28 Table I1 provides an example of the differences between topdown and bottom-up approaches. In the topdown strategy, health-care utilization

392

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Table I. Elements in Direct and Indirect Costs

Direct costs

Indirect costs

Emergency assistance Hospitalization Physician services

Premature mortality(years of life lost)

Long-term care Surgery Laboratory and drugs

Disability(work days lost) (leisure time lost) (regular activity foregone)

Equipment

Intangibles Pain Suffering of family Insurance difficulties Personal costs Income assistance

Table 11. General Procedures for Calculating the Direct Costs of Illness (Hospital Care as an Example)

Top-down approach Total expenditures for hospital care

X

Use of hospital services by specific diagnosis Total use of hospital services for general population ~~~

~~~~

Bottom-up approach Average cost of hospital care by

specific diagnosis (e.g. perday rates)

x Total use (rate of use) for hospital services by specific

diagnosis

is assessed from a broad perspective. Data on the total health expenditures of a country and the proportion of all health-care services used by persons with a specific disease are employed to arrive at a cost estimate. Hospital costs for diabetes, for example, would be calculated by multiplying the total expenditures for hospital care by the percentage of all hospital services used by the diabetic population. The bottom-up procedure focuses on the amount of health services used from a narrower perspective. Direct costs for a specific illness are calculated with data on the average cost of a health service and the number of times that service is used by persons with the relevant disease. The costs of hospital care in diabetes, fur example, would be calculated by multiplying the average cost of a hospital stay (per day) by the total number of hospitalized days attributed to the diabetic population. This characterization has necessarily been elementary. Similar t o p d o w n and bottom-up procedures can be used to determine the costs of physician care, nursing home care, dentists' services, and pharmaceuticals. Nuances to these calculations also exist. Further details on the

specific methods, study designs, and data to apply to estimate the costs of illness and the cost of diabetes are available e l s e ~ h e r e . ~ ~ , ~ ~ , ~ ~ ~ Whether a top-down or bottom-up approach is used most often depends on the data and resources available for s t ~ d y . National ~ ~ , ~ ~statistics are generally the primary source for costof-illness estimates because of their availability. Health-care expenditure and hospital utilization data, for example, are available in most developed countries. These data are generally better suited for topdown estimations. Identified populations of persons with NIDDM may be another potential source of information. Surveys in these cohorts can provide good data for use in bottom-up estimations. National statistics on diabetes, however, can be misleading. In national statistics, utilization data are often only listed by primary diagnosis categories. Estimates based exclusively on figures where diabetes is the primary cause of admission, the primary cause for a doctor's visit, or the primary cause for nursing home care, however, may miss the health-care costs incurred by diabetic individuals where diabetes is a secondary or tertiary factor. Diabetes is a leading cause for

ECONOMICS AND TYPE I1 DIABETES

393

blindness, renal failure, heart disease, and lower limb amputations. Diabetic individuals who have these complications may not have diabetes listed as a primary diagnosis. Thus, the costs associated with these individuals are not accounted for. Another limitation of this characterization is that the costs related to NIDDM may not be estimated accurately. The ICD diagnostic category for diabetes concerns only the general definition of diabetes. Subclassifications of diabetes, such as IDDM and NIDDM, are not distinguishable in primary diagnosis data. Thus, estimates on the cost of NIDDM based on national statistics may be biased to the extent that persons with IDDM are included in the calculations, and subjects with NIDDM on insulin therapy may be misclassified as IDDM. Present knowledge on the cost of NIDDM. The literature regarding the cost of diabetes is fairly extensive. Data specific to NIDDM, however, are not common. The major reason for this is outlined above, namely the inability to distinguish between persons with NIDDM and persons with IDDM in diagnostic or ICD coded information. Nonetheless, as persons with NIDDM generally account for the large majority of all persons with diabetes, the cost estimates reported for diabetes, overall, may provide some indication of the magnitude of costs related to NIDDM. Most estimates on the cost of diabetes are from the United States. Published figures suggest that the costs of diabetes are substantial and growing at a considerable rate (Figure 2). The Statistical Bureau of the Metropolitan Life Insurance Company has estimated the costs of diabetes over a period of years using a topdown approach and primary diagnosis data on healthcare utilization, disability, and mortality from national statistics. In their reports, the total $billion

1

1969

1973

1975

1977

1980

1984

1987

Figure 2. Trends in the cost of diabetes, United States.

economic impact of diabetes has risen from $2.6 billion in 1969 to a projected $13.8 billion in 1984.33 Direct costs have risen much more than indirect The most recent estimate34 indicates that the economic costs of diabetes in the United States were $20.4 billion in 1987. This cost figure was estimated from a bottom-up approach using data available from national surveys and national health organizations. This methodology differed from that used in most previous reports, not only with respect to the procedure, but also in that the authors went one step further than most previous studies by considering information where diabetes was listed as a secondary or tertiary reason for hospitalization and where diabetes was listed as an underlying cause of death. This practice is likely to provide a more accurate estimate for the cost of diabetes. Several reasons have been suggested to account for the increase in total economic costs and the higher increase related to direct costs ~ b s e r v e d . Firstly, ~ ~ , ~ ~the prices for health-care services have increased substantially over the last 20 years. Secondly, the prevalence of diabetes is increasing. Thirdly, there may be an increased use of health-care services by persons with diabetes now compared with previous years; and, lastly, many new and expensive treatment technologies have been introduced into diabetes care practices over the last two decades. Huse and colleagues have conducted the only study specific to NIDDM. Their report found that the economic costs of NIDDM to the United States were $19.8 billion in 1986.36 About $12 billion was related to health-care expenditures, $7 billion for diabetes care, and $5 billion for its complications. The impact of premature mortality and disability approached $8 billion. Their estimates were based on yet another computational technique. Using a topdown approach, data where diabetes was the primary factor for health-care use, disability, and mortality were combined with data related to NIDDM where diabetes was a secondary or tertiary factor for health-care use, disability, and death. Secondary and tertiary costs related to NIDDM were estimated by multiplying the proportion of circulatory, visual, and kidney disease related to NIDDM by the overall costs reported for these conditions. Internationally, there have been no reported studies on the cost of NIDDM. Again, estimates on the overall costs of diabetes are more common.

394

Two recent studies have been reported from the . ~ ~ that United Kingdom. Gerard et ~ 1 estimated the costs of diabetes in England and Wales were at least €259.5 million in 1984. The value placed on absenteeism related to diabetes could add another €0-343 million to this figure. Laing and Williams38 estimated that the direct costs of diabetes for England and Wales were €484 million in 1986. A much earlier study was reported from Sweden by J o n ~ s o n . Using ~~ a bottom-up approach and primary diagnosis data, Jonsson estimated that the total cost of diabetes to Sweden in 1978 was 1317 million Swedish kronor. Healthcare costs accounted for 43% of the total costs, while indirect costs due to premature disability and mortality comprised 57% of the total costs.

( b ) Patient costs and concerns As mentioned earlier, a number of elements are involved in estimating the economic costs of a specific disease. The discussion, to this point, has highlighted the direct cost components which make up a cost-of-illness estimate and indicated how they have been applied in practice. Most often, cost-of-illness estimates have been based on only those costs which are easily measurable; i.e., those identified through national statistics or surveys. This process, however, often excludes the costs faced personally by the individuals living with the disease. These costs and concerns inciude the direct payments made by individuals for health care and/or health insurance, as well as the sacrifices in time made to pursue certain actions in the course of living with the disease. Costs such as these may play an important role in the overall costs of an illness. Unfortunately, very little has been published on the patient costs and concerns specific to diabetes, much less NIDDM. Most of what is understood in this area largely centers on health insurance issues. Health insurance reduces the risk to the individual of incurring substantial medical expenses and thus can affect the access to and affordability of health care. It is an economic necessity for individuals with diabetes because of their increased use of health services and their susceptibility to diabetic complications. Yet, in countries where universal coverage is not available, these characteristics may serve as reasons for insurers to limit the availability or coverage of insurance for persons with diabetes. In the United States, where universal health insurance coverage is not procurable for persons

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under age 65, insurance attributes for the diabetic population appear to be fairly similar to those of the non-diabetic p o p ~ l a t i o n . ~Almost ~ , ~ ' nine out of every ten individuals with diabetes has some type of health insurance coverage. Persons with diabetes in the United States, however, may spend a considerable amount of time trying to locate an insurance plan. One report found that 23% of an IDDM cohort reported being denied a health insurance policy at some time in their lives.42 The frequency with which people with NIDDM are denied insurance policies is not known, nor is the amount of time that one might spend looking for insurance. Even if a person with diabetes is able to obtain health insurance, the possibility remains that, in some health systems, their coverage may be restricted or incomplete. The affordability of care then becomes an issue, as patients may have to pay directly for some or all of their diabetes care. In sporadic situations, these out-of-pocket costs can be catastrophic. In the United States, one study found that the average out-of-pocket expenses for a person with diabetes was roughly $335 (in 1977) compared to $184 for a person without diabetes.40This difference may be largely attributable to the increased use of basic health services by diabetic patients. Few data have been reported on the costs that NIDDM patients directly face. Employment issues have also been a point of concern for persons with diabetes. Historically, employment prospects for an individual with diabetes have been limited. Many employment positions have not been open to persons with diabetes because of apprehensions over absenteeism, accidents, and higher insurance costs. Blatant discrimination by employers towards diabetic applicants and higher rates of job refusal among diabetic individuals have been While it seems apparent that some risk may be involved in employing insulin-treated individuals, the question that ultimately faces society is whether the benefits of employing individuals with diabetes outweigh the risks. In some occupations, it appears that a decision has been made that the risk may outweigh any benefits. Insulin-treated individuals are prohibited from flying airplanes, driving heavy goods vehicles, and enlisting for military service in the United What this all means with regard to economic costs to the patient is that the time spent training and looking for a job may be sizeable. However, the exact cost and the

ECONOMICS AND TYPE I1 DIABETES

implications for persons with NIDDM remain to be determined.

395

in turn, is generally valued in terms of average wages. The value of lost productivity when someone is disabled, for example, would be equal to the average wage that would have been earned 2 . Evaluative Approaches had the person not been disabled. Average wages, however, differ according to age and sex. Thus, (a) Cost-benefit/cost-effectiveness/cost-utilitystudies. some segments of society may receive a higher Estimating the economic efficiency of diabetes value for health than others. treatments, interventions, or control programs is a second approach in which health economic To overcome this criticism, other economists have adopted the "willingness-to-pay" approach research may be applied. Evaluative studies of this type, however, have not been widely used in towards valuing life or health.56,57In this approach, the value of life or health is assigned as the diabetes research. Cost-benefit, cost-effectiveness, and cost-utility analysis are the major formats for expressed value of how much an individual or group of individuals would be willing to pay evaluating economic efficiency. All three forms of to forego death or to forego disability. This evaluation attempt to consider the costs of a information might be gathered from a survey of treatment or intervention against the outcomes the affected population or the general population. produced, thereby looking at efficiency in addition Nonetheless, there remain some deficiencies in to effectiveness. For policy decisions, the costs the willingness-to-pay approach; notably, the and outcomes of the new intervention would be ability of someone to pay to prevent an unhealthful evaluated in terms of the costs and outcomes of event may affect the value of what they are an alternative treatment or intervention (usually willing to pay. the current standard of practice) to determine if Quite a bit of attention has recently been an efficient and effective use of resources might given to the advantages of CUA. CUA incorporates be gained from the new a p p r o a ~ h . ~ ~ , ~ ~ the concept of quality of life into the assessment Cost-benefit analysis (CBA), cost-effectiveness analysis (CEA), and cost-utility analysis of health outcomes. An evaluation of this type may be more appropriate because most new (CUA) methods are all generally similar in how therapies and interventions have been found to they estimate costs in an evaluation. Nearly all exert their principal influence on quality of life costs are expressed from a monetary point of rather than on quantity of life or quantity of view. The three forms of analyses differ, however, health.58 An economic study whose primary in the manner in which they assess the outcomes focus was on the quantity of life gained from of a program or therapy. CBA places a monetary experimental treatment could, in these circumvalue on the health outcomes of a program, stances, underestimate the true impact of an whereas CEA and CUA do not. CEA usually intervention. presents health benefits in physical units that The quality adjusted life year (QALY) is the summarize their outcome, such as the number of end-point at the core of most cost-utility studies, lives saved.52 CUA generally summarizes health and was developed specifically to adjust the outcomes in terms of the quality adjusted life quantity of life gained in an intervention by the years gained. Table 111 details the differences quality of life gained. This process involves the between these analyses. Specific details on these analyses are available e l s e ~ h e r e . ~ ~ , ~ ~ , ~ ~ designation of utility values for the different states of quality of life that an individual may In general, CEA and CUA are favored over ~ r e f e l 5and ~ will, at some point, involve a survey CBA in the health-care sector.54 Some analysts of the participants or others on the relative value have argued that there are methodological and or preference that they place on these different ethical problems associated with assigning a value states of quality of life. to health outcomes. The thought that human life Differences in the assessment of health and health can have a dollar value can be a particularly sensitive issue for some evaluators.21~29 outcomes between cost-benefit, cost-effectiveness, and cost-utility studies also affect the manner in More often, however, economists have a which these instruments can be used in policy problem with the manner in which "health" is decisions. Since CBA values benefits in monetary assigned a dollar value in CBA. The quantity of terms, it is possible to compare directly the health gained with an intervention is most often benefits and opportunity costs of a program.z1 valued in terms of the work productivity that is When weighed in the context of other intergained with the intervention. Work productivity,

396

SONGER Table 111. Distinctions between Cost-Benefit, Cost-Effectiveness, and Cost-Utility Analyses ~

~

Cost-benefit analysis

Cost-effectiveness analysis

Cost-utility analysis

Basic equation*

Basic equation*

Basic equation

Monetary cost Monetary benefits

Monetary cost - Monetary benefit Health gained

Monetary cost - monetary benefit Health gained

Monetary costs Cost due to increased use of health care related to experimental treat-

Moneta y costs Cost due to increased use of health

care related to experimental treat-

Moneta y costs Cost due to increased use of health care related to experimental treatment

ment Cost of side-effects related to experimental treatment Cost of adherence to experimental

Cost of side-effectsrelated to experimental treatment Cost of adherence to experimental treat-

treatments or technology

ments or technology

ment Cost of side-effects related to experimental treatment Cost of time lost from work due to health-care visits

Monetary benefits

Monetary Benefits

Monetary Benefits

Health costs saved from the preven-

Health costs saved from the prevention of disease

Health costs saved from the prevention of disease

Measure of health gained Life years, disability prevented,

Measure of health gained Quality adjusted life years

tion of disease

Wages or salary saved when disease is prevented and person can work

Measure of health gained None

etc. ~

~~

* Source: Emery and S~hneiderman.~~

ventions measured in monetary terms, it is then possible to determine whether an objective is worth pursuing and to what degree resources might be committed to it.21,60 Programs or treatments where benefits exceed costs are desirable, but this scenario is not always necessary for a program to be implemented. In contrast, when a CEA or CUA is undertaken, it is necessarily assumed that a given treatment or disease control program is worth pursuing. The nature of these instruments (health benefits are not measured in monetary terms) does not permit one to determine whether a program is worthwhile. Instead, emphasis is placed on comparing one program or treatment strategy with another and determining whether the strategy of interest is worthwhile. Common objectives in this comparison include (a) gaining the greatest health benefit for a fixed level of costs, or (b) securing a given level of health for the least cost.21In CUA, attaining the lowest cost per QALY is generally desirable. Derivation of cost-benefit, cost-effectiveness, or cost-utility estimates. Undertaking an economic evaluation can be somewhat complex as data are

needed from a variety of areas. Interventions or treatments are likely to affect both direct (in terms of its medical care implications) and indirect (in terms of its effect on employment and quality of life) concerns. A full economic assessment should involve the measurement of the costs and effects in both areas. In some settings, investigators have judged only the benefits of a treatment intervention. Kaplan and Davis6I have detailed this very occurrence with respect to the evaluation of diabetes education programs. The appropriate data and points to consider in an economic evaluation will vary according to the intervention being monitored. In general, though, most evaluations should try to consider the specific costs of starting and operating a program, the additional health-care costs involved to improve health outcomes, the savings in healthcare costs when disorders are prevented or delayed, and the additional health-care costs involved with any side-effects evolving from an intervention. An assessment of the time spent by patients and their families to travel to appointments related to the program and its impact on their employment should also be

ECONOMICS AND TYPE I1 DIABETES

examined, as well as some assessment of the health benefits gained. These analytic principles have been detailed in a publication by Udvarhelyi et aLh2 Explicitly stating the perspective (or viewpoint) in which the economic evaluation is being considered is another principle mentioned by Udvarhelyi et al. An economic evaluation can be conducted from the viewpoint of a number of interest groups, including that of society, healthcare providers, patients, and the government. The results of an economic evaluation, however, can depend on the viewpoint taken.53 The costs and effects assessed from the viewpoint of society, for example, may be quite different from the costs and effect assessed from the viewpoint of a government insurance agency. Also, something which is cost-effective from one viewpoint may not be from another. The broadest viewpoint applied in economic evaluation is that of society since it includes all costs and benefits associated with an inter~ e n t i o nGovernment .~~ interests, in contrast, may only be concerned with the impact of treatments on government revenue and expenditure, and, sometimes, its impact on empl~yment.~'This perspective necessarily ignores costs directly borne by patients. A study designed to address the patient's perspective can consider out-ofpocket costs and employment concerns. These can be important issues if the equity, or fairness, of an intervention is to be examined. Most of the economic evaluations published have considered the impact of interventions from the perspective of society. Further principles of importance include paying attention to the chance that the costs and benefits of an intervention may occur in different time periods and adjusting for the differences in how these effects are valued over time (discounting), considering that limitations (or uncertainty) may be present in the data and adjusting the results for the variation that may occur (sensitivity analyses), and providing a summary measure of the efficiency related to a treatment or intervention, such as a ratio of costs relative to benefitsh2 Present knowledge on the efficiency of diabetes treatments and interventions. A number of investigators have sought to portray the relative efficiency of various diabetes-related programs over the years. However, as ElixhauseP3 points out, most have failed to adequately evaluate the costs or health effects of these programs. The use of

397

proper cost-benefit, cost-effectiveness, or costutility analysis on diabetes-related issues has been quite limited. Most of the evaluations undertaken have centered on the examination of strategies for identifying and/or treating diabetic retinopathy and have been published within the last 3 years. Table IV outlines these and other relevant evaluative studies published in the literature. Overall, the findings of the retinopathy studies suggest that screening for and treating diabetes retinopathy is cost-effective, particularly for patients taking insulin. In a preliminary report, Javitt et ~ 7 1 estimated . ~ ~ that the cost of detection and treatment in proliferative retinopathy amounts to $966 for each year of blindness prevented in IDDM patients. Treatment and screening costs, however, were not discounted to account for their different values over time. In a subsequent and more detailed investigation, they reported that screening to detect retinopathy in the IDDM population and prompt treatment may result in cost savings of $62-109 million (due to prevented or delayed blindness) for an annual IDDM incidence cohort.66 A further report found that additional savings of $9500 may occur with each new IDDM person enrolled in a screening program (over the number already being screened).67 All three studies outlined above examined costs and benefits from the viewpoint of the government and were limited in focus to the experience expected for IDDM patients. The economic efficiency related to screening and treatment therefore could be different in other settings and populations. Dasbach et for example, included both IDDM and NIDDM patients in their study. They found that the costs of screening and subsequent treatment were recovered for persons using insulin (both young and old), but not for persons diagnosed with diabetes at a later age and not on insulin. Recent attention has also been given to the relative efficiency of screening for diabetic retinopathy in primary care settings. Two investigators have examined the cost-effectiveness of various screening strategies for detecting true cases of retinopathy in this environment. Sculpher et a1.69,70 found that the costs and effects of screening vary according to the medical professional conducting the test (GP, hospital physician, clinical assistant), the type of procedure undertaken (ophthalmoscopy, retinal photographs), and the location where screening

398

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Table 1V. Economic Evaluation of Diabetes-Related Issues in the Literature Study

Evaluation of..

Kaplan ef a1 , 1987''

Perspective

Costs examined

Cost-utility of diet and exercise Not stated intervention in NlDDM patients

Health professional resource charges Laboratory charges

Cost-effectiveness of treating Government retinopathy agency

Screening costs Treatment costs

Effects examined

a

General results

Quality of well-being Well-years gained

Cost per well-year gamed = $ion70 This figure is comparable to other advocated health-care programs Based on small sanrples size5

Person-years of sight saved Reading vision years saved

Costs of screening and treatment per person-year of sight saved B96h a

ldvitt

cf ( 1 1 , 1990&

Uasbach

ef

a!..

1Y9I6*

Disability payments saved Sight-years saved Reading sight saved Cost of false negatives

Screening for and treating patients with retinopathy is costeffective May realize a cust savings of 862-109 million and 71-85000 sight-years for annudl incidence cohort Applv to IDDM patients only

Screening costs Treatment costs Indirect costs of blindness

Sight-years gained Cost of false negatives

Costs for screening are recovered by the avoided costs of blindness in insulin-taking persons. but not in non-insulin-taking persons

Efficiency of current screening Government conditions and those at higher agency levels of compliance

Treatment costs Screening costs

a At current levels, $101 million Disability payments saved IS saved with screening. 47700 Savings in tax revenues lost sight-years in an annual incidue to blindness dence cohort Cost of false negatives Additional savings of 9Y500 occur Medicare payments saved with each new person screened

Screening strategies for refer- Society nng cases of diabetic retinopathy

Screening costs Patient costs

Number of true-positive cases of retinopathy identified

The efficiency of screening varies according to the person doing the screening and the site where it is performed The sensitivity of primay screeners in this studv was low

screening Stra- Society tegies for refernng true cases of diabetic retinopathy

Health Service resources used in screening Patient costs

Number of true-positive cases of retinopathy identified

Trade-offs exist such that to increase sensitivity, you have to adopt tests with lower specificities andlor higher costs per case detected

Screening costs Patient costs

Number of true-positive a In a government health-care setting, screening with retinal cases of retinopathv identphotographs (with dilated pupils) ified 1s more cost-effective than ophthalmoscopy

Program treatment costs (not clearly specified)

Savings in hospital charges Average length of stay in hospital by mother and infant

Treatment costs Screening costs

Screening strategies for Government detecting diabetic retinopathy agency

Screening and treatment stra- Society tegies for diabetic retinopathy a

I d V l t t t'f 0 1 ,

Sculpher

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PI

a/.

cI

RI., Additional

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Lairson 1'1 al , 199271 Screening strategies for refer- Government ring cases of diabetic retino- delivery system, patients pathy

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IDDM patients only Screening is 1Do'% sensitive

Cost-effectiveness of a dia- Not stated betes pregnancy intervention program

takes place (hospital clinic, office). Screening strategies that were better at identifying true cases of diabetic retinopathy were generally lower in specificity and/or higher in cost per case found. Lairson et ~ 1reported . ~ that ~ screening with retinal photographs can be an efficient alternative to a standard ophthalmologist's examination in settings where ophthalmologists are scarce. Screening with retinal photography was much more sensitive than an ophthalmologic examination in this older study cohort. The underlying message coming from these studies suggests that appropriate screening stra-

0

a a

Save over $5 i n hospital charges for every $1 spent on the program Largest returns are seen for the most severe cases of diabetes: less severe cases had no significant savings Pregnancy outcomes are not stated

tegies vary considerably in primary care surroundings. The most efficient method for screening can depend on the population being screened, the training level of the screeners, the availability of equipment, and, ultimately, the goal(s) of the program relative to the resources available to cany it out. 3 . Explanatory Approaches

Another relevant strategy when studying the economics of disease is to examine how economic factors might influence health care and health

ECONOMICS AND TYPE I1 DIABETES

behaviors. The supply of and demand for healthcare services, cost controls, and economic incentives can affect how often health-care services are used. Similarly, the price of lifestyle activities or knowledge about them may affect “healthy” behaviors. Both health services and healthy lifestyles may ultimately affect health. Interventions on economic factors, then, could serve as another means to control or prevent disease. Health services utilization and health behaviors may be influenced by a number of policy instruments, including legislation, regulation, taxation, price controls, practice controls, subsidization, education, and litigation. These instruments may affect those with disease indirectly (through governmental regulations and controls on reimbursement, supply, and demand) or directly (through economic incentives to pursue a particular behavior). Economic incentives most often influence individual behavior by changing the price of undertaking a certain decision. In the diabetes domain, economic incentives could seek to (a) change the price of healthy or unhealthy activities, or (b) change the knowledge of the individual about the consequences of healthy or unhealthy activities. In theory, the lower the price to the individual for engaging in “healthy” endeavors, the higher the likelihood that this activity will take place. Or in the case of education policies, the more informed the individual is of the benefits or risks involved with his or her behavior(s), the more likely he or she is to make rational decisions regarding this behavior. Thus, economic incentives provide one form of catalyst to individuals to choose certain behaviors over others. Changing economic factors in order to influence behavior, however, may not necessarily lead to healthy behaviors. Many of the policy options described above as incentives to changing behavior may also involve the loss of certain freedoms, such as the loss of individual choice over behavior. Governmental interventions run the risk of becoming overbearing and potentially failing in their effect by interfering excessively in people’s lives. Funds necessary to enforce regulations or taxes may exceed the benefits of intervention. Individuals also must have some degree of motivation to change behavior. If a person does not believe that the risks of becoming chronically ill are high, incentives may have no effect. Some qualifications may be necessary before

399

policy instruments can function well. Firstly, as Lave73states, ”in an efficient system, people face correct incentives.” Having a system where persons with unhealthful behaviors face lesser or equal personal cost for health-care maintenance than a person with a healthy lifestyle may be a disincentive towards any preventive intervention. The challenge is to provide an environment where correct incentives are obtainable and desirable. This could involve a wide array of options to provide attainable financial incentives for people to choose healthy behaviors (from legislation requiring insurance coverage for preventive care, to higher insurance premiums for the obese, to subsidies to physicians providing preventive care). Secondly, in a fair system, people are reasonably informed about the choices that they face and make appropriate decisions.73 Individuals should be well educated about the risks that they face under certain behaviors. Thirdly, the power of legislation and regulation must be tempered by the ability to enforce the programs enacted.73 Regulations mean nothing unless you can enforce them. As concerns could arise about undue governmental interference, persuasion and education could be more efficient instruments from a disease control standpoint than legislation or reg~dation.~~ Few documented examples on the use of policy instruments specific to diabetes care or control exist, although these could feasibly include regulation of the reimbursement and payment for primary diabetes care, subsidies to physicians who provide preventive care, and incentives to attend education programs specific to the risks surrounding NIDDM. Alternatively, insurance premiums for persons who engage in “unhealthy” behaviors could be increased. While little is known about the effectiveness of these and other economic interventions as they relate to NIDDM, more thought ought to be given to “experimenting” with economic incentives as a means to change patient and provider behaviors in the future.

111. HEALTH ECONOMICS AND THE PREVENTION OF NIDDM As mentioned earlier, the morbidity, mortality, and quality of life events associated with NIDDM have engendered serious discussion

400

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about the implementation of prevention programs. While answers to the long-term questions regarding NIDDM prevention are not clear, some evidence suggests that screening for glucose intolerance or intervention trials on hyperglycemia, hypertension, and/or obesity, diet, and physical inactivity may be reasonable to consider at this time.'"17 It is important, then, to consider the prospect that prevention programs may be advocated on a larger or full-scale basis at some point in the future. What role might economic analysis have to play in this plan? Figure 3 outlines several approaches in which economic elements may fit into an epidemiologic model for disease control and prevention. In this framework, monitoring or surveillance provides population-based information on the public health impact of disease, as well as a means to identify risk factors that may be amenable to intervention. The public health impact of a disease can be defined not only by its frequency (incidence/prevalence) and consequences (morbidity/mortality), but also by its economic implications (costlpatient concerns/ equity concerns). With the identification of amenable risk factors, an intervention strategy can be undertaken to reduce or control the impact of disease. Recent evidence suggests that diet and exercise programs could be a suitable means of intervention for NIDDM prevention.7P79Intervention on economic factors with a view to changing health behaviors or diabetes education could also be considered. Ultimately, the outcomes associated with the intervention should be evaluated. Has the program changed health outcomes? If the program is effective, many will then question the cost of the program. Are the benefits of the intervention worth its costs? The means of evaluating the efficiency of a program include cost-benefit, costeffectiveness, and cost-utility analyses. After this

surveillance

risk factors +intervention 3 effectiveness efficiency . ) equity cost of illness Incentives economic descriptors Education patient concerns Regulation CR4 CEA equiw

c

+-

Figure 3. Economics and a model for disease control.

step, the model then returns to the surveillance phase to determine the extent to which the intervention actually reduced the public health impact of diabetes. The major focus of economic attention in the model for NIDDM prevention is likely to come in the evaluation of intervention programs. Increasing emphasis is being placed on the value for money that health-care technologies, pharmaceuticals, and treatments provide.*" If preventive efforts in an NIDDM trial are demonstrated to be safe and efficacious, then attention certainly will shift to the costs of that intervention and the benefits that one gains relative to this cost. Ultimately, this means that more significance will be assigned to the collection of welldefined cost and benefit information in NIDDM prevention trials. It is important, then, to consider including an economic component as one part of the protocol when a trial is being developed. An economic evaluation conducted after an intervention trial has been completed has to rely upon economic data collected retrospectively. In addition to being more costly to collect, these data may not genuinely reflect the influences of the intervention. Some types of cost and patient information, such as the time spent by health professionals with patients or the impact of treatment on employment, also may not be available after the trial is finished. With early planning, appropriate economic measures can be surveyed as part of the process of the trial. While the relevant data and points of interest to include in an economic evaluation will vary according to the intervention being considered, most evaluations should try to consider the start-up costs of a program (the cost of locating people to participate), the treatment costs associated with the program, the adherence costs, the impact of side-effects, the degree of health improvement associated with the program, and the savings in health-care costs when disorders are prevented or delayed (Figure 4).Some assessment of patient concerns (the time spent by patients and their families traveling to appointments related to the program and its impact on their employment) should also be examined. Some of this information might already be included in the normal protocol of the trial. The frequency of contact with a health professional, for example, is usually already known and documented as one difference between experimental and control groups. Other types of

ECONOMICS AND TYPE I1 DIABETES

401

trial can provide information to address these concerns. # cost of treatment cost of adherence cost of side effects

A

-

IV. CONCLUSION improvement in health savings in treatment costs

Figure 4. Issues in the economic evaluation of a prevention program.

information, however, such as the time that health professionals spend with patients, most likely will have to be surveyed during the trial as an additional component to the protocol. One common question raised in the field is whether prevention can pay for itself. In many instances, advocates may claim that a prevention program is a good action to pursue because it saves money. Disease is being prevented and, therefore, the costs of treating that disease are saved. Detailed evaluations of the efficiency of prevention programs, however, show that in most scenarios prevention does not save money; rather it uses more.22,81-83 The benefits of an intervention are usually not obtained without some costcosts for the purchase of equipment, the training of manpower, the increase in staff levels, and other items. The economic issue to consider, according to Weinstein,s* is not whether prevention saves money, but whether prevention improves health at a reasonable cost. This cost may often be larger than the benefits observed, but if the benefits are more favorable than those seen with present treatment patterns or with another intervention, it may be preferable to seek prevention despite the cost. Another broad economic issue to consider in the prevention of NIDDM is some assessment of the equity, or fairness, implications of health interventions. For example, do prevention programs benefit all with NIDDM, or only a segment of the population? Decisions regarding treatments for NIDDM or disease control programs specific to NIDDM should consider the impact of the intervention on patients in various demographic circumstances. An intervention which improves heakh, but involves some assigned costs, for example, may not be within the economic reach of the poor. Setting up an evaluation of equity issues within the framework of an intervention

This paper has discussed the status and meaning of three general economic approaches to diabetes research and prevention: the description of costs and patient concerns, the evaluation of costs relative to benefits in treatments and interventions, and the explanation of how economic factors might affect diabetes care. What makes these approaches to diabetes research especially effective is the context in which they are presented. Health economic data provide information that is directly relevant to the decisions made by governments and health agencies regarding diabetes. Governments, health-care organizations, and legislators are likely to be more sensitive to diabetes-related issues if they can see the economic impact, economic efficiency, and fairness of these events. Such entities are likely to have limited understanding of what the repercussions of changes in the incidence, prevalence, or case-fatality rates of NIDDM entail. Unfortunately, good data on the economics of NIDDM in the developed and developing world are lacking at this time. The dependence of most datasets on primary diagnosis data and their inability to separate NIDDM and IDDM subjects severely hinder our capability to define the economic impact of the disease and the economic efficiency of its treatments. The influence of various economic factors on diabetes care and diabetes behaviors has not been examined in well-defined populations. Looking to the future, the development of a better means of identifying individuals with NIDDM (e.g., surveillance programs, registries) could do much towards highlighting the epidemiologic as well as the economic components of the disease. It is not unusual for epidemiologic limitations to affect economic analyses. Health economics and epidemiology are integrated together more often than many researchers realize. Epidemiologic data (incidence, prevalence, morbidity, and mortality) from the basis for many health economic estimates, while economic methods are capable of consolidating multiple epidemiologic endpoints (e.g., morbidity and mortality) into one overall measure of health status. Because of this

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relationship and the paucity of data on the economics of NIDDM, possibilities for generating economic information from diabetes epidemiology studies should be explored. Perhaps the most immediate way in which economic approaches could be integrated with epidemiologic research specific to NIDDM is in the evaluation of prevention programs. It is clear that prevention-oriented public health programs have done the most to improve health overall in the past. With information that NIDDM is a significant public health problem and that the risk factors for NIDDM may be amenable to intervention, many are thinking of implementing primary and secondary prevention programs as the means of reducing or controlling the impact of NIDDM. Economic elements can play a large role in the evaluation and subsequent justification of these programs. Certainly, diabetes is a leading cause of disability and death in developed and developing nations. Its burden, however, can be reduced through both epidemiologic and economic means. The task presented before the research community is to generate and cultivate these means.

Acknowledgement

7.

8.

9.

10.

11.

12. 13.

14.

This research was supported by an Individual National Research Service Award (l-F32-HS00038-03) from the Agency for Health Care Policy and Research.

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