Cost-effectiveness Analysis

Concept

The objective of economic evaluation of healthcare interventions is to inform resource allocation decisions in the healthcare sector, through determining whether a proposed intervention is a “good” use of scarce resources. This is assessed through comparison of the additional resources consumed (costs) for the improvement in health benefits generated (e.g., life years gained) associated with one health intervention compared with another. Cost-effectiveness analysis, where the health benefits are measured in terms of a single dimension represented by natural units, is just one type of economic evaluation. It is used to determine which of the alternative interventions provides the most efficient method to achieve a particular outcome (technical efficiency). As such, the units chosen to represent the effect in a cost-effectiveness analysis should be deemed worthwhile (to society or the policy maker), appropriate for measuring the key impact of the intervention, and common across the alternatives to be compared. For example, the cost-effectiveness of a screening test may be established in terms of the cost per case detected, the cost per percent survival at 5 years, the cost per life saved, or the cost per life year gained. Ideally, the measure of effect chosen will relate to a final outcome (e.g., life years gained), but where this is not possible, there should be a way to link it to final effect (e.g., symptom days averted), or it should be deemed to have value in itself (e.g., cancers detected). Alternative methods for economic evaluation include cost-benefit analysis (where health benefits are measured and valued in monetary terms) and cost-utility analysis (where quality of life is considered alongside quantity of life and health benefits are valued according to patient preferences to construct a composite measure of health outcome, e.g., the quality-adjusted life year or QALY). It should be noted, however, that sometimes the term cost-effectiveness is used to cover any of these methods of economic evaluation, where the comparison need not be measured in natural units.