What is the future of health economics?

Health Economics and Policy – what is next?

John Cairns, Professor of Health Economics at the London School of Hygiene and Tropical Medicine, is pondering what’s next for his discipline and where it is likely to focus attention.

“I think health economics has been quite good at reaching out to other disciplines, working with them and borrowing ideas,” he says. “I would call this methodological agility, and we need to do more of that.

New entrants to the profession can use this methodological agility to integrate their economic research on health with economics more broadly, so broadening their focus, he says

“Just look at Covid-19 as an example. Any policy to restrict the spread of the virus in responding to the pandemic had a huge impact on the economy more generally — we’re just so ill prepared to integrate the economics of specific health issues with the more general operation of the economy. So, I think that’s an area to develop — the health sector and the social policy sector are far too compartmentalised.”

But Cairns says distribution economics would be his priority. “We’re entering a stage where easy wins in economic growth may be over now, and so I think the battle for different shares of the pie is going to become more intense. I think distribution issues will be important and so we’ll need more research on that.”

These three areas of focus (broadening scope, integrating with other fields and economic distribution of health care) are echoed by fellow health economists.

Bruce Hollingsworth, Professor of Health Economics at Lancaster University, who leads the HEAL (Health Economics at Lancaster) group, picks up on the case for distribution economics.

“Inequalities + levelling should be our core focus for the next 20 years,” he says. “We always knew there were inequalities, but there’s a spotlight on them now, so there’s a big opportunity in the next few years for people to examine them. And inequalities are our thing. It’s what we should be looking at as it’s what we are trained to do — to look at inequalities and differences amongst populations.”

The equity agenda also needs to be explored from an ethical viewpoint, advises Mike Drummond, Emeritus Professor of Health Economics at the University of York and former Chair of OHE’s Board of Trustees.

He sees a need to build in ethics to the practice of economic evaluation. “The thing that we are always coming up against, in economic evaluation, is that there are therapies which don’t appear to be cost effective, but people feel they should be provided — I’m thinking of orphan drugs and the like,” he says. “There’s quite a lot of work starting now examining the trade-offs between equity and efficiency in economic evaluations.”

This challenge of managing demand for expensive new drugs for a small number of patients is a point also picked up by Nigel Edwards, Chief Executive of the Nuffield Trust. “I think there’s a challenge coming, thinking about how we’re going to deal with some of the very high-cost medicines, which don’t really work in systems based on solidarity very easily because they are so high cost.”

For Jon Sussex, Chief Economist at Rand Europe and former deputy director of the OHE, the debate about whether to fund orphan drugs boils down to a need to identify the opportunity cost of health interventions, or how much money a population is willing to pay for health gain. “Paying hundreds of thousands of pounds to treat one person means that those hundreds of thousands of pounds are not available to treat other people. We cannot get away from the fact that there is an ‘opportunity cost’ in economist-speak and that there is ultimately a limit to how much the public is willing to pay via taxation or insurance for health care.”

This requires working within other fields of social economics — education, employment, transport — to address problems, says Hollingsworth. “The North West and the North East are not going to level up on their own so we need to identify what needs to happen over the next 20 years” he says.

“We’ve got the data, we’ve got the information, we know what would make a difference potentially, so these are huge areas for people to work in. I think that’s a big area that we could work on in the future as health economists, but that does mean working with other economists.”

Ginny Acha, Associate Vice President of Global Regulatory Policy at MSD and former senior spokesperson for The Association of the British Pharmaceutical Industry (ABPI), sees great potential in collaboration.

“Cross-disciplinarity is always the place where you can start to find a new energy,” she says. “Health economics and AI is already happening, and I think that is going to be a rich area for convergence. Maybe there are areas of study that we haven’t thought about before where cross-disciplinarity would be good. Health economics and the built environment may be an obvious one.”

Broadening focus is something Anne Mills, Professor of Health Economics and Policy at the London School of Hygiene and Tropical Medicine, would also encourage. “Health economists should not solely focus on health maximisation,” she says. “I’ve always been a bit resistant to worrying only about health, as conventionally defined. We should be using our economic tools to broaden our focus — to explore big questions that impact on other sectors.”

One way, she suggests, is to use dynamic modelling. “Health systems are so complicated, whether it’s the different types of services or the different subsystems within them, but dynamic modelling is a way to get at that. For example, we can use modelling to link economics and epidemiology— that’s happened within the Covid pandemic — giving us the capacity to look more at the trade-offs between maximisation of health and maximisation of income.

“Although modelling has its limitations, with those sorts of big questions, it’s really the only way, at the moment, to explore possible trade-offs and challenges.”

Two other key areas identified for future focus were healthcare systems (and their infrastructure) and public health.

Taking on the first point, Nancy Devlin, Professor of Health Economics at the University of Melbourne and Senior Fellow at the OHE, says it’s time for a broader vision of health economics. “We need to find better ways of generating evidence that would allow us to achieve allocative efficiency and equity across the whole healthcare system – and optimize the choices around what’s funded and who provides it,” she says.

“What are the goals of health care, and how can economic evidence assist in achieving them? What levels of user fees and subsidies are required and what’s fully funded and for whom? Where does competition work and where does competition not work in the health care sector, and why? How can we best to align the incentives health system goals — those are the bigger questions.”

Peter Smith, Emeritus Professor of Health Policy at Imperial College London, suggests ‘the hospital’ as a route to exploring infrastructure. “It’s a black box that we don’t often open up,” he says. “But the hospital is probably the most complex institution that humankind has developed. We still don’t know nearly enough about it.”

Like several health economists, he says there is also a clear need to properly address workforce planning. “There’s a tradition that workforce has not been tackled very strongly in the NHS, and although we have Health Education England and others, I’m not convinced that there’s someone really getting to grips with this issue,” he says.

Richard Murray, Chief Executive Officer at The King’s Fund, agrees, calling UK health workforce planning “a mess”, since the UK stopped using workforce modelling to inform training and recruitment policies.

“It has been in disarray since 2012 because no one at national level owned the policy and left it to the will of the market,” he says. “I think the 2012 reforms did more damage than we realised and it’s only now that we are beginning to understand.”

Prior to the reforms, he says health economists influenced spending reviews. “You’d say ‘here’s the money, here’s the activity and here’s the workforce, they’ve all got to add up.’ That has got lost. That conversation stopped happening and now I think we’re in the process of trying to put it back.”

For Alistair McGuire, Professor of Health Economics at The London School of Economics and Political Science, this lack of workforce analysis within the UK health sector is “absolutely despicable”.

“We’re in a sector where 70% of expenditure goes on labour and yet there’s so little time spent on labour economics. We still don’t know very much about how many nurses to doctors we should have and what their optimal configurations should be. That’s always been surprising to me.”

Turning to public health economics, there is a view that this is a neglected area, the poor cousin of economic evaluation of health technologies.

“It’s an area where there’s such great data but it’s totally under-researched,” says Hollingsworth

“The health technology assessment type framework has come on in leaps and bounds, especially in the last 10 to 15 years, and I think it is now really respected, especially in the UK. But it’s almost like the public health economics or whatever we call it, the non HTA bit, has fallen behind in terms of getting the messages across.”

Mills agrees: “I always think that one of the reasons why public health is deemphasised is because it doesn’t lend itself to cost-effectiveness methodology as easily. Cost-effectiveness methodologies suit very specific interventions and public health rather gets left out of it.”

Other areas flagged by health economists for future focus include developing new approaches to measuring value in health care, the economics of adopting new technology and identifying success.

“There’s still a measurement challenge,” says Edwards. “If we are resource constrained, the quality of our resources and how we allocate them within and between programmes is important. We’re not very good at measuring value and, in particular, we are quite bad at disinvestment, and I think there’s more to do to help people think about approaches to that.”

But among some senior health economists, there is a weariness about the focus on evaluative health economics and a desire to push beyond that into a wider and bolder agenda.

As Sussex says: “Economic evaluation is not a precise science and economists might be more usefully employed elsewhere than in developing ever more complicated methods to achieve approximations.”

Devlin agrees: “We’ve focused an awful lot on HTAs of new medicines and I’m starting to wonder whether we’ve become too distracted by that in health economics.

“I think we still put far too little effort into the economic evaluation of older technologies and the identification of low-value treatments and services that should be candidates for disinvestment – and how to provide economic evidence of wider relevance to priority setting and resource allocation across the whole health care sector. And much more broadly, shifting our efforts to the economics of healthcare systems, how they are funded and provided…I would like to think that in another 60 years’ time, we would have developed better ways of generating evidence that would allow us to completely reengineer healthcare systems and optimise choices around what’s funded and who provides it.

“The routine use of cost-effectiveness analysis in health technology assessment has been a triumph of health economics, and not one we should ever take for granted. But I do wonder if health economics has become rather struck in that sphere, with the risk that we focus on technical methods questions, rather than engaging with the wider political economy of the health care systems we are seeking to improve. It feels like we need to really go beyond HTA and re-engage with a bolder set of questions about the economics of the whole health care that I learned about when I first started out. And that wasn’t all about methods of economic evaluation.”