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

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  • 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
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    References listed on IDEAS

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    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.
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    Cited by:

    1. David Bardey & Philippe de Donder & Vera Zaporozhets, 2024. "The Health Technology Assessment Approach of the Economic Value of Diagnostic Tests - A Literature Review," Working Papers hal-04472485, HAL.

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