Economic Evaluation of Public Health Laws and Their Enforcement

Public Health Law Research, February 2012

45 Pages Posted: 29 Feb 2012

See all articles by Ted R. Miller

Ted R. Miller

National Public Services Research Institute

Delia V. Hendrie

Independent

Date Written: February 14, 2012

Abstract

Policy decisions can be informed by information on anticipated costs and expected future benefits of courses of action. The key questions in economic evaluation of a public health law are whether its benefits, as measured by health outcomes or cost savings, exceed its costs; secondarily, there is the question of the distribution of those costs and benefits across stakeholders. Cost savings are concrete and understandable benefits, and they provide a single compact measure that captures wrecked cars, stolen statues, fractured arms, even deaths.

Economic evaluation begins with the selection of an intervention to be studied and a type of economic evaluation to use. Cost-effectiveness analysis uses naturally occurring outcomes to compare interventions with the same objective. The results are reported as the cost per life year saved or the cost per harm prevented. Cost-utility analysis is a special form of cost-effectiveness analysis in which the outcomes are measured using multidimensional measures of health outcomes such as quality adjusted life years (QALYs) that incorporate both quality and survival information. In cost-utility analysis, the evaluative measure is the cost per QALY gained or saved. Benefit-cost analysis is a third type of economic evaluation, in which all of the health outcomes are measured in monetary terms, with the results reported either as a benefit-cost ratio or as net benefits (i.e., benefits minus costs).

An economic evaluation measures all costs and benefits in inflation-free dollars stated in a base year (for example, in 2012 dollars). An estimate of the costs of the various alternative options is computed. Relevant effectiveness measures are selected, ideally final outcomes like impaired driving crashes averted, and effectiveness estimated. The benefits of the various options are calculated and valued, and then a cost-outcome measure is computed. Cost-outcome measures are the metric used in economic evaluation to compare benefits of an intervention such as a public health law with its costs. In calculating cost-outcome measures, an incremental approach is typical; with the additional net costs that one alternative imposes over another compared with the additional benefits provided. The ratio of the additional costs over the additional benefits is termed the incremental cost-effectiveness ratio (ICER). Sensitivity analysis is then deployed to deal with uncertainty; it tests whether plausible changes in selected estimates or assumptions affect results of the analysis.

Economic evaluations of public health laws involve decisions and challenges that rarely arise in economic analyses of health care programs and practices. They include methods to value a variety of subtle intangible costs that a law imposes on people by shaping their behavior directly, costs of passing and implementing a law, costs of adjudication and sanctioning, unmeasured anticipated benefits and costs (for example, if a driving curfew reduces crime), and mixing of health benefits with employment or educational benefits. In evaluating public health laws from an economic perspective, a comparison of benefit-cost ratios or incremental cost-effectiveness per QALY gained is a valuable aid in deciding which options represent optimum value for money invested. Researchers also face the challenge of explaining the limits of cost analysis to policy champions.

Keywords: public health law research, empirical legal studies, economic evaluation

Suggested Citation

Miller, Ted R. and Hendrie, Delia V., Economic Evaluation of Public Health Laws and Their Enforcement (February 14, 2012). Public Health Law Research, February 2012. Available at SSRN: https://ssrn.com/abstract=2012618

Ted R. Miller (Contact Author)

National Public Services Research Institute ( email )

Delia V. Hendrie

Independent ( email )

No Address Available

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