Machinations

Health economics and cost-effectiveness models

Reimbursement bodies ask for a cost-effectiveness model and often a budget-impact model too. A Markov model is patients moving between health states, with a cost and an outcome attached to each state, and the submission is usually an Excel workbook or a TreeAge file.

See cost and outcomes before the price is set.

What you can do with it

  • Draw the health states

    Patients flow between states such as well, ill and dead, with the chance of each move as a die roll on the connection.

  • Forecast cost and outcomes

    Play many patients and Forecast the spread of cost and years of life, not only one average.

  • Explain it to the room

    Clinicians, economists and decision-makers read the same diagram, instead of a workbook only its author can follow.

  • Early economic modeling

    Move a price or adherence Lever and see which assumptions the result depends on, before the formal model is built.

  • Teach Markov models

    Students Play a model and watch the cohort move between states, which a table of probabilities does not show.

  • Start from your spreadsheet

    Give the AI Agent your workbook and correct the diagram it builds from it.

Play a live example: a three-state Markov model

A cohort of patients moves each year between Well, Ill and Dead, and every year in a state adds its cost. Press Play, then move a Lever to see cost and survival respond.

The chart follows the healthy cohort shrinking year by year as people fall ill and some die. Each state adds its own cost every year, and every year someone is alive adds a life-year, so the model keeps a running total of both. Divide one by the other and you have the cost per life-year, the figure a reimbursement body weighs against its threshold.

Move the treatment price and only the cost side changes. Move the treatment effect and both sides change at once: fewer people get ill, fewer die, so costs fall while life-years rise. Seeing which assumption the result really leans on, before anyone builds the formal model, is where a diagram earns its place. Machinations is not the submission file: send your agency the format it asks for, often Excel or TreeAge. It is where you explore the model early and explain it to the people who need to understand it.

Test the price before the submission

Model health states, costs and transitions, then Forecast cost and outcomes for each price and treatment pathway.

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