Elsevier

Journal of Health Economics

Volume 24, Issue 6, November 2005, Pages 1055-1075
Journal of Health Economics

Assessing the macroeconomic impact of a healthcare problem: The application of computable general equilibrium analysis to antimicrobial resistance

https://doi.org/10.1016/j.jhealeco.2005.02.003Get rights and content

Abstract

There is a positive relationship between the health of a nation and its economic prosperity. However, in evaluating health care, economists typically concentrate on the economic impact only to the health (care) sector, which may mis-specify the social costs and benefits of a disease or intervention. This paper demonstrates the value of using a macroeconomic approach to modelling a major health problem, using the context of antimicrobial resistance and the application of the computable general equilibrium technique. This approach is described in detail and its ‘added value’ demonstrated in the case of AMR.

Introduction

As recently illustrated by the Commission on Macroeconomics and Health (Sachs, 2001), the positive relationship between the health of a nation and its economic prosperity is well recognised (Pritchett and Summers, 2001). That ill health reduces not only individual welfare, but also impacts on national economic performance, has been clearly demonstrated, for example, in the case of malaria and HIV/AIDS (Gallup and Sachs, 1998, Kambou et al., 1992, Sachs and Malaney, 2002).

However, health economists typically concentrate on the economic impact only to the health care sector. Although this is occasionally broadened to include the effect on the individual (typically, the patient), the wider impacts are rarely considered. Yet, given the size of effects beyond the health (care) sector that may occur in some instances, knowledge about the social efficiency of policies may depend upon the assessment of these wider effects (Smith et al., 2003, Bloom and Canning, 2000).

It has been suggested that antimicrobial resistance (AMR),1 and policies to address AMR, require analyses that move away from the narrow, microeconomic approach that is currently used (Smith and Coast, 2002). Empirical studies of AMR and interventions to address AMR, typically consider only the costs to the health sector of increased hospitalization, tests and treatment (Wilton et al., 2002); occasionally, the impact of increased mortality and morbidity to the patient/family and society is considered (Eandi and Zara, 1998, Bloom and Mahal, 1997, Coast et al., 1996, Coast et al., 2002, Ibelings and Bruining, 1998, Washio, 2000, Romero-Vivas, 1995, Haddadin, 2002, Blot, 2002, Kim et al., 2001). However, these estimates do not take account of the multiplicity of effects of AMR on non-health sectors and wider economic indicators, such as national income, labour supply and economic growth (Eandi and Zara, 1998). The economic impact of AMR is further influenced by the international movement of people, whether a country has a pharmaceutical research and development sector, agricultural use and international trade (Smith and Coast, 2003, Coast and Smith, 2001, Coast and Smith, 2002, Coast and Smith, 2003, Coast et al., 1998). Again, these wider factors are not usually considered.

In principle, a full societal cost–benefit study should be able to take an economy-wide approach and account for these factors. However, not only has this not been conducted for AMR, but it would be extremely difficult to conduct without a model of the economy, which incorporated the interaction of AMR (interventions) with other sectors of the economy (Wilton et al., 2002, Eandi and Zara, 1998).

To provide a more complete assessment, a framework for measuring the economy-wide impact of a health problem, such as AMR is, therefore, required. Such a framework is provided by the computable general equilibrium (CGE) approach (Shantayanan et al., 1997, Vargas et al., 1998). The purpose of this paper is thus to demonstrate the value of using a macroeconomic approach to modelling a major health problem through applying the CGE approach to AMR; although the implications for wider economic analysis in health are not limited to this example. Following this introduction, the paper provides a brief overview of the CGE approach, outlines the development of a CGE model of AMR, presents the results of counterfactual experiments using this model and concludes with a discussion of the value of this approach.

Section snippets

Computable general equilibrium modelling: an overview

CGE is a general equilibrium model that is solved to find the simultaneous price-guided clearing of all sectors of the economy. The model describes the economy using representative economic agents: consumers, producers and government.2

Application of CGE to health care: estimating the macroeconomic impact of antimicrobial resistance

This section presents a specific CGE model to determine the economy-wide impact of antimicrobial resistance (AMR), in the specific context of methicillin-resistant Staphylococcus aureus (MRSA) in the UK. This section describes the modelling procedure and the results of the model simulations. As the model contains a considerable number of mathematical equations and space constrains what can be presented in this paper, the primary equations only are presented for illustrative purposes. A series

Simulation results: the economic impact of AMR on the UK economy

As indicated earlier, AMR and MRSA specifically, will increase the length of treatment time, morbidity and mortality. Although these have been shown to increase health service and patient/family costs, there are a number of mechanisms, whereby it is reasonable to postulate that MRSA will have a negative effect on the wider economy. The expected effect of these mechanisms is outlined briefly below before presenting the results of the modelling exercise.

First, increasing mortality and morbidity

Discussion

The starting point for the work presented in this paper was the suspicion that there are likely to be wider effects of AMR on the UK economy than those related solely to the health care sector. The results from the application of a CGE model confirm that the spill-over effects of AMR are indeed likely to result in a greater societal impact on the economy than that demonstrated by studies confined to the health care sector. Taking a micro approach, as studies usually do, appears to underestimate

Acknowledgements

The authors would like to express their appreciation to Anne Mills and Paul Coleman of the London School of Hygiene and Tropical Medicine, Alistair Munro of the University of East Anglia and Tim Peters of the University of Bristol, for their advice and comments as members of the Project Advisory Group. Thanks are also due to John Wyn Owen and The Nuffield Trust for funding this work and hosting project meetings. Useful comments were also received from participants at the Fourth Congress of the

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