Estimating health opportunity costs in low-income and middle-income countries: a novel approach and evidence from cross-country data

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The economic evaluation of healthcare interventions requires an assessment of whether the improvement in health outcomes they offer exceeds the improvement in health that would have been possible if the additional resources required had, instead, been made available for other healthcare activities. Therefore, some assessment of these health opportunity costs is required if the best use is to be made of the resources available for healthcare. This paper provides a framework for generating country-specific estimates of cost per disability-adjusted life year (DALY) averted 'thresholds' that reflect health opportunity costs. We apply estimated elasticities on mortality, survival, morbidity and a generic measure of health, DALYs, that take account of measures of a country's infrastructure and changes in donor funding to country-specific data on health expenditure, epidemiology and demographics to determine the likely DALYs averted from a 1% change in expenditure on health. The resulting range of cost per DALY averted 'threshold' estimates for each country that represent likely health opportunity costs tend to fall below the range previously suggested by WHO of 1-3× gross domestic product (GDP) per capita. The 1-3× GDP range and many other previous and existing recommendations about which interventions are cost-effective are not based on an empirical assessment of the likely health opportunity costs, and as a consequence, the health effects of changes in health expenditure have tended to be underestimated, and there is a risk that interventions regarded as cost-effective reduce rather than improve health outcomes overall.

Original languageEnglish
Article numbere000964
Pages (from-to)1-11
Number of pages11
JournalBMJ Global health
Issue number6
Publication statusPublished - 5 Nov 2018

Bibliographical note

Funding Information:
Contributors All authors contributed to the concept and design of this paper. JO led on the analysis and drafting, and the final paper was edited and approved by all authors. Funding This study was funded by and Melinda Gates Foundation (Grant Number: OPP1165566).

Publisher Copyright:
© Author(s) (or their employer(s)) 2018.

Copyright 2019 Elsevier B.V., All rights reserved.

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