IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v20y2023i5p4637-d1088940.html
   My bibliography  Save this article

Cost-Benefit Analysis versus Cost-Effectiveness Analysis from a Societal Perspective in Healthcare

Author

Listed:
  • Robert J. Brent

    (Department of Economics, Fordham University, Bronx, NY 10458, USA)

Abstract

Cost-effectiveness analysis (CEA) is the main way that economic evaluations are carried out in the health care field. However, CEA has limited validity in deciding whether any health care evaluation is socially worthwhile and hence justifies funding. Cost-Benefit Analysis (CBA) is the economic evaluation method that should be used to help decide what to invest in when the objective is to record the impact on everyone in society. Cost-utility analysis (CUA), which has its roots in CEA, can be converted into CBA under certain circumstances that are not general. In this article, the strengths and weaknesses of CEA relative to CBA are analyzed in stages, starting in its most classical form and then proceeding via CUA to end up as CBA. The analysis takes place mainly in the context of five actual dementia interventions that have already been found to pass a CBA test. The CBA data is recast into CEA and CUA terms in tabular form in order that the contrast been CEA and CBA is most transparent. We find that how much of the fixed budget that is used up to fund other alternatives determines how much is left over to fund the particular intervention one is evaluating.

Suggested Citation

  • Robert J. Brent, 2023. "Cost-Benefit Analysis versus Cost-Effectiveness Analysis from a Societal Perspective in Healthcare," IJERPH, MDPI, vol. 20(5), pages 1-12, March.
    • Handle: RePEc:gam:jijerp:v:20:y:2023:i:5:p:4637-:d:1088940
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/20/5/4637/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/20/5/4637/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johannesson, Magnus, 1995. "The relationship between cost-effectiveness analysis and cost-benefit analysis," Social Science & Medicine, Elsevier, vol. 41(4), pages 483-489, August.
    2. Robert Brent, 2011. "An implicit price of a DALY for use in a cost-benefit analysis of ARVs," Applied Economics, Taylor & Francis Journals, vol. 43(11), pages 1413-1421.
    3. Brent, Robert J., 1991. "A new approach to valuing a life," Journal of Public Economics, Elsevier, vol. 44(2), pages 165-171, March.
    4. Joseph E. Aldy & W. Kip Viscusi, 2008. "Adjusting the Value of a Statistical Life for Age and Cohort Effects," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 573-581, August.
    5. Pei-Jung Lin & Brittany D’Cruz & Ashley A. Leech & Peter J. Neumann & Myrlene Sanon Aigbogun & Dorothee Oberdhan & Tara A. Lavelle, 2019. "Family and Caregiver Spillover Effects in Cost-Utility Analyses of Alzheimer’s Disease Interventions," PharmacoEconomics, Springer, vol. 37(4), pages 597-608, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. De Donder, Philippe & Bardey, David & Zaporozhets, Vera, 2024. "The Health Technology Assessment Approach of the Economic Value of Diagnostic Tests - A Literature Review," TSE Working Papers 24-1508, Toulouse School of Economics (TSE).
    2. Bardey, David & De Donder , Philippe & Zaporozhets , Vera, 2024. "The Health Technology Assessment Approach of The Economic Value of Diagnostic Test: A Literature Review," Documentos CEDE 21041, Universidad de los Andes, Facultad de Economía, CEDE.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert J. Brent, 2010. "Setting Priorities for HIV/AIDS Interventions," Books, Edward Elgar Publishing, number 12742.
    2. James Hammitt, 2013. "Admissible utility functions for health, longevity, and wealth: integrating monetary and life-year measures," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 311-325, December.
    3. Martin Gaynor & Nirav Mehta & Seth Richards-Shubik, 2023. "Optimal Contracting with Altruistic Agents: Medicare Payments for Dialysis Drugs," American Economic Review, American Economic Association, vol. 113(6), pages 1530-1571, June.
    4. Aldy, Joseph, 2019. "Birds of a Feather: Estimating the Value of Statistical Life from Dual-Earner Families," Working Paper Series rwp19-013, Harvard University, John F. Kennedy School of Government.
    5. Herrera-Araujo, Daniel & Rochaix, Lise, 2020. "Does the Value per Statistical Life vary with age or baseline health? Evidence from a compensating wage study in France," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    6. Patrick Carlin & Brian E. Dixon & Kosali I. Simon & Ryan Sullivan & Coady Wing, 2022. "How Undervalued is the Covid-19 Vaccine? Evidence from Discrete Choice Experiments and VSL Benchmarks," NBER Working Papers 30118, National Bureau of Economic Research, Inc.
    7. Hala Abou-Ali & Hesham El-Azony & Heba El-Laithy & Jonathan Haughton & Shahid Khandker, 2010. "Evaluating the impact of Egyptian Social Fund for Development programmes," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 2(4), pages 521-555.
    8. Kevin Haninger & James K. Hammitt, 2011. "Diminishing Willingness to Pay per Quality‐Adjusted Life Year: Valuing Acute Foodborne Illness," Risk Analysis, John Wiley & Sons, vol. 31(9), pages 1363-1380, September.
    9. Nicolò Gatti & Beatrice Retali, 2021. "Fighting the spread of Covid-19 : was the Swiss lockdown worth it?," IdEP Economic Papers 2101, USI Università della Svizzera italiana.
    10. James K. Hammitt & Peter Morfeld & Jouni T. Tuomisto & Thomas C. Erren, 2020. "Premature Deaths, Statistical Lives, and Years of Life Lost: Identification, Quantification, and Valuation of Mortality Risks," Risk Analysis, John Wiley & Sons, vol. 40(4), pages 674-695, April.
    11. Powdthavee, Nattavudh & van den Berg, Bernard, 2011. "Putting different price tags on the same health condition: Re-evaluating the well-being valuation approach," Journal of Health Economics, Elsevier, vol. 30(5), pages 1032-1043.
    12. Hultkrantz, Lars & Svensson, Mikael, 2012. "A Comparison of Benefit Cost and Cost Utility Analysis in Practice: Divergent Policies in Sweden," Working Papers 2012:5, Örebro University, School of Business.
    13. W. Kip Viscusi, 2018. "Pricing Lives: International Guideposts for Safety," The Economic Record, The Economic Society of Australia, vol. 94(S1), pages 1-10, June.
    14. W. Viscusi, 2008. "How to value a life," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 32(4), pages 311-323, October.
    15. Brajer, Victor & Mead, Robert W. & Xiao, Feng, 2008. "Health benefits of tunneling through the Chinese environmental Kuznets curve (EKC)," Ecological Economics, Elsevier, vol. 66(4), pages 674-686, July.
    16. David Boisclair & Yann Décarie & François Laliberté-Auger & Pierre-Carl Michaud & Carole Vincent, 2018. "The economic benefits of reducing cardiovascular disease mortality in Quebec, Canada," PLOS ONE, Public Library of Science, vol. 13(1), pages 1-13, January.
    17. Thomas DeLeire & Shakeeb Khan & Christopher Timmins, 2013. "Roy Model Sorting And Nonrandom Selection In The Valuation Of A Statistical Life," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 279-306, February.
    18. Nicolò Gatti & Beatrice Retali, 2021. "Saving lives during the COVID-19 pandemic: the benefits of the first Swiss lockdown," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 157(1), pages 1-21, December.
    19. Eve Wittenberg & Lyndon P. James & Lisa A. Prosser, 2019. "Spillover Effects on Caregivers’ and Family Members’ Utility: A Systematic Review of the Literature," PharmacoEconomics, Springer, vol. 37(4), pages 475-499, April.
    20. Meera Kotagal & Kiran J Agarwal-Harding & Charles Mock & Robert Quansah & Carlos Arreola-Risa & John G Meara, 2014. "Health and Economic Benefits of Improved Injury Prevention and Trauma Care Worldwide," PLOS ONE, Public Library of Science, vol. 9(3), pages 1-7, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijerp:v:20:y:2023:i:5:p:4637-:d:1088940. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.