Disease Based Allocative Efficiency Framework: Implementation. Volume II: Full Report

In response to concerns about inefficiencies that can be caused by a distorted health service mix, the Health Economics Unit has a major research stream on allocative efficiency. This paper reports on that research, with a brief description of the Framework for priority setting and its application to diabetes. The Framework has been developed based on economic principles which require that all options be treated equivalently, whether they be for primary prevention, management or end stage care. The Framework ensures the consideration of options outside narrowly defined areas of program responsibility of a single agency. The structure developed is that of a disease based model, which provides a mechanism within which to establish resource priorities to minimise disease burden. In application of the model to diabetes, the overwhelming conclusion is that too few resources are allocated to primary and secondary prevention and health promotional approaches to management, with a consequent higher complication rate than could otherwise be achieved. This is consistent with the distortions expected from a medically focused funding system. We found the broad structure of the Framework to be workable, and the priority setting task tractable with a modest resource commitment (of perhaps 3 to 6 equivalent full time research staff at senior and junior research fellow level, per disease). Suggested modifications to the Framework largely reflect the extreme paucity of cost-effectiveness and health outcome data. The role of this type of research in contributing to research agendas and priorities for clinical and health services research is perhaps one of the more important conclusions.