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 13: Cost–Benefit Analysis and Equity

Robert J. Brent

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


13. Cost–benefit analysis and equity 13.1 INTRODUCTION In this chapter we add equity considerations to the efficiency objective. Instead of going into first principles of what equity means in health economics, along the lines of Williams and Cookson (2000), we will simply build on the discussion of equity in CUA in Chapter 10. The two building blocks are the QALY weights and the person trade-offs. In a CBA context these blocks transform into the use of income distribution weights and the inclusion of a ‘numbers effect’. We devote a section to each of these blocks after providing the necessary introductory background. 13.1.1 A Re-Examination of QALY Weights in CUA In equation (10.2), we defined the weighted total number of QALYs as: Weighted total QALYsϭa1 QALY1 ϩa2 QALY2 (13.1) where 1 was the ‘poor’ group (with the lower number of QALYs), 2 was the ‘rich’ group (with the larger number of QALYs) and the weights a1 and a2 recorded the relative QALY weights for the two groups with a1 Ͼa2. If we multiply both sides of equation (13.1) by P (the price of a QALY), and acknowledge the way we converted QALYs into monetary terms, via Bϭ P.QALY, equation (13.1) becomes: Weighted total benefitsϭa1 B1 ϩa2 B2 (13.2) Equations (13.1) and (13.2) tell us that, if one wishes to use weights for outcomes that are in QALYs, one should also be willing to use weights when outcomes are measured in monetary units....

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