Duke 2008 | ASHE | Equity and Efficiency in Health and Healthcare

1. Background.

There is an ongoing debate as to whether preventative interventions, such as condom provision, are preferable to treatment, in the form of antiretroviral therapies (ARVs) ? see for example, Creese et al. (2002), Hogan et al. (2005), and Canning (2006). In the context of a fixed budget constraint, Cost-Effectiveness Analysis (CEA) based on Disability Adjusted Life Year (DALYs) could be used. However, with the increased flow of funds now being allocated to HIV/AIDS interventions, the emphasis should now switch to deciding whether any particular intervention is worthwhile or not. For this task, Cost-Benefit Analysis (CBA) is necessary.

One could stick with the philosophy of CEA based on DALYs, yet undertake a CBA, if only one had available a price to attach to the DALYs. For then the cost of a DALY could be compared with the value of a DALY. The purpose of this paper is to present, and apply, a revealed preference methodology to derive an estimate for the price of a DALY. We will use our estimate of the price of a DALY to form the benefits of ARVs in order to carry out a CBA of this intervention. We take from the literature estimates of the costs of saving a DALY by ARVs.

1. Methods, Data and Estimation.

This paper uses the revealed preference approach to estimate the price for a DALY saved implied by grant decisions by the Global Fund for AIDS, Tuberculosis and Malaria (GFATM). The GFATM grants that we attempted to explain consisted of rounds 1-5 going to countries in Africa as of December 2005.

From a specification of the social utility function, and expenditure decisions that depend on social utility and other factors, we derive a linear estimation equation determining the grants to a particular country as a function of DALYs saved and GNP. The ratio of these two regression coefficients produced the estimate of the price of a DALY. OLS estimation was used. 3. Results

The estimated price was $6,300 for a DALY saved from any disease, but it was $11,900 from a DALY saved specifically from HIV/AIDS. Irrespective of which DALY price one uses, and no matter the cost of the particular ARV intervention we consider in the literature, the benefits of ARVs exceed the costs. This conclusion holds whether we consider preventative interventions or not. So it does not matter whether it is true that ARVs are less cost-effective than preventative programs. The only result that is important is that current ARVS are socially worthwhile if one accepts the preferences implicit in GFATM grant decisions.

1. Conclusions

The DALY price was converted into the value of a life saved by multiplying by 38.813 years. The resulting value of a life lost due to HIV/AIDS was US $472,837. This figure can be compared with the amounts used to evaluate the benefits of interventions in Tanzania. US $7,500 was the value used to evaluate lives saved by expanding female primary education enrollments based on the human capital approach. Using the value of a statistical life (VSL) method produced a value of US $38,900, about five times larger, in the evaluation of VCT services. We now see that the revealed preference methodology valued lives saved even higher, around 11 times greater than for the VSL method. Policy evaluators for HIV/AIDS interventions have a wide array of alternative methodologies to choose from to carry out a CBA. They are not wedded to any one method to estimate the benefits.