Cost-Benefit Analysis and Cost-Effectiveness Analysis: The basics

Summary

Cost-Benefit AnalysisCost-Effectiveness Analysis
Compares cost of intervention with benefit incurred where benefit is measured in monetary unitsCompares cost per consequence (outcome) of two or more interventions where outcomes are measured by ‘natural’ units
Focuses on monetary outcomesFocuses on non-monetary outcomes
Net Benefit = Benefits- CostsCost-Effectiveness Ratio (CER) = Cost of intervention/ Effect of intervention
Outcomes include:
net monetary benefit
Outcomes include: Years of life saved, number of deaths prevented, etc.
The intervention providing maximum net benefit should be chosenThe intervention with higher natural units (life-years gained, etc.) should be chosen
Results are presented in terms of ratio of benefit-to-cost, and return on investmentResults are presented in terms of incremental cost per unit of effect for interventions
Benefits obtained from CBA may be direct, indirect, or intangibleCEA focuses only on health outcomes, neglecting non-health outcomes
The outcomes are already knownCost-effectiveness depends on long-term outcomes which are unknown
Suitable for evaluation of industrial projects, as monetary value can be easily calculatedMore suitable for service-oriented sectors
Data collection for costs can be complexDoesn’t make comparisons between interventions producing different outcomes

Useful Links:

Links to relevant articles:

https://onlinelibrary.wiley.com/doi/abs/10.1002/9781119171386.ch24#:~:text=Cost‐effectiveness%20analysis%20is%20a,of%20a%20program%27s%20many%20benefits.

http://www.bandolier.org.uk/painres/download/whatis/What_is_health_econ.pdf

Links to relevant sites:

https://www.cdc.gov/policy/polaris/economics/cost-effectiveness.html

https://www.nlm.nih.gov/nichsr/edu/healthecon/04_he_06.html

https://en.wikipedia.org/wiki/Cost–benefit_analysis

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