Cost–Benefit Analysis and Health Care Evaluations

Cost–Benefit Analysis and Health Care Evaluations

Robert J. Brent

Cost–benefit analysis is the only method of economic evaluation which can effectively indicate whether a health care treatment or intervention is worthwhile. This book attempts to build a bridge between cost–benefit analysis, as developed by economists, and the health care evaluation literature which relies on other evaluation approaches such as cost-minimization, cost-effectiveness analysis and cost–utility analysis.

Chapter 6: Fundamentals of Cost-Effectiveness Analysis

Robert J. Brent

Subjects: economics and finance, health policy and economics, public finance, social policy and sociology, health policy and economics

Extract

6. Fundamentals of cost-effectiveness analysis 6.1 INTRODUCTION Here we start with the first of two chapters on CEA, focusing on the basic principles. Unlike a CM, which only deals with costs, a CEA includes effects as well as costs. The two are related by forming a cost-to-effects ratio. What to include in this ratio is the first topic under discussion. Then we present the underlying CEA decision-making model and illustrate how cost-effectiveness calculations are to be made and interpreted. Because of the inherent shortcomings of CEA, we quickly turn attention to ways of converting CEA into CBA. The case studies are primarily devoted to showing how these conversion methods have been put into practice. 6.1.1 CEA as an Approach to Evaluation Unlike a CM study, a CEA looks at both the consequences (effects) and costs of a procedure. A CEA looks at the amount of cost per unit of effect: C / E. One can now compare across (some) programs. Moreover, one can allow for the fact that different programs achieve their objectives to different degrees. Thus, for instance, the cost per case detected can be used to make comparisons of screening programs for different diseases. If one screening program can detect more cases than another, this is allowed for in the comparison. For CM one must have a given / fixed level of output. On the other hand, there is a fundamental problem with a costeffectiveness (and cost–utility)...

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