Cost Effectiveness Analysis

Decent Essays

Cost-effectiveness analysis (CEA) is the most used technique for evaluating health interventions. In this type of analysis, the basic question is asked, “How much health benefit do we get for our money? The purpose of the CEA is to help decision makers allocate health care resources efficiently. In a CEA, the analyst expresses health benefits in unit of health outcome (e.g., life saved) and the costs in dollars. They calculate a cost-effectiveness ratio: the ratio of dollars expended to health outcome obtained. The analyst compares one intervention with another, so they calculate cost-effectiveness as the difference in cost between two interventions, divided by the difference in health benefit obtained. For example, in a study that assessed the cost-effectiveness of testing cholesterol levels in children, compared with not testing, the cost-effectiveness ratio would be: (Costs with testing – Costs without …show more content…

A characteristic feature of CBA is that it expressed in dollar terms, all the benefits and costs associated with an initiative so that they can be directly compared. Policies and programs, whose benefits outweigh their costs, generate net benefits. Compared with CEA, CBA allows you to compare initiatives that have different purposes such as an improvement in program participants’ reading scores because the outcomes have been monetized. Costs and benefits are measured over a long-term horizon, and future dollars are discounted to reflect the time value of money, that is, the concept of money is worth more in the present than in the future. The result of a cost-benefit analysis is presented as a benefit –cost ratio that indicates the benefit received for every dollar invested, providing a bottom-line summary of the net benefit to society (Cost-Benefit Knowledge Bank for Criminal Justice,

Get Access