Stressing this importance, Prof David Epstein, Professor of Health Economics at the University of Granada in Spain, had earlier demonstrated that direct costs, i.e. resources that can be directly associated with individual patients or with specific health programmes such as medicines and consumables were “usually straightforward to estimate” and often the minority of total costs at around 30%.
But in keeping with the warning sounded by Africa Health Business chair, Dr Amit Thakker, in his talk at the recent BHF Conference in Cape Town, Epstein stressed that “joint costs and overheads” – often the majority of total costs at around 70% – should not be overlooked in calculating average cost.
Admin cost issues, Thakker had told his South African audience last month, had been major stumbling blocks in the national health insurance equivalent roll-outs in Kenya and Ghana, for example.
“Administrative and clinical support services that are shared among multiple health programs are always very important for calculating average cost,” Epstein explained, adding that they may also be useful for decision-making about future services.
Also important by association were marginal costs, i.e. the increase in total costs if the number of users are increased: “It is a prediction of the future impact of starting or changing a health program and useful for decision making when considering a new service or expanding an existing service.”
Financing, Epstein noted in his concluding remarks, was usually understood “as an element in a decision about a new service”. Among the first steps to be taken in this regard was to evaluate the evidence about the benefit and costs of the new service: in short, Health Technology Assessment (HTA).
Other logical steps would be to decide to include (or not) the service in the Health Basket; decision/negotiation about the price (in the case of medicines or devices or other services provided by third parties), and other possible conditions to be considered such as requirement for the manufacturer to collect and report further evidence and/or patient population limitations.