Marginal or Incremental Analysis, Cost-Effectiveness Ratio

Marginal or Incremental Analysis

A marginal analysis is concerned with the additional costs and additional outcomes achieved from a marginal (unitary) change in service. For example, a marginal analysis of a mammography screening facility would consider the additional costs and outcomes associated with a one-unit increase in the number of mammographies undertaken within the department. It is important to note that the additional costs and outcomes associated with a one-unit change are not necessarily equal to the average cost and outcomes associated with the group. This is due to the existence of fixed costs and outcomes that are not affected by the number of units. As a result, marginal values are used in economics to determine the actual impact associated with changes in service.

In contrast, an incremental analysis is concerned with the additional costs and additional outcomes [Page 695]associated with the introduction of a new service. For example, an incremental analysis would consider the additional costs and additional outcomes of a new approach to mammography screening (e.g., 2 view vs. 1 view).

Economic evaluation, irrespective of whether it is cost-effectiveness, cost-utility, or cost-benefit analysis, is interested in the impact of a change compared with the position before the change. As such, economic evaluation is concerned with marginal or incremental analyses, and, where the outcomes measured involve a single nonmonetary unit (e.g., quality-adjusted life years or life years), the results are presented as an incremental cost-effectiveness ratio.

Incremental Cost-Effectiveness Ratio

The incremental cost-effectiveness ratio (ICER) gives a measure of the additional cost per unit of health gain. It is estimated by comparing the additional costs and outcomes associated with the new service (or intervention) with those of the original service(s):

When determining ICERs for a set of interventions, the interventions should be ranked in ascending order of outcome (or cost) and a ratio calculated for each intervention relative to the next best (more costly) viable intervention by dividing the additional cost by the additional outcome produced.

Incremental Analysis versus Average Analysis

As with the mammography example above, a new intervention or service (2 view) is rarely the only option available (1 view). Even when the alternative is to “do nothing,” this is rarely associated with zero costs and zero outcomes. For example, no active screening would involve the costs and outcomes of breast cancers found clinically. As such, an assessment of the impact of the addition of 2 view mammography should involve the additional costs and outcomes associated with 2 view compared with the costs and outcomes without 2 view (e.g., 1 view and no active screening).

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