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The usefulness of average cost‐effectiveness ratios

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  • Eugene M. Laska
  • Morris Meisner
  • Carole Siegel

Abstract

We demonstrate that average cost‐effectiveness ratios (CERs) play an important role in the evaluation of the cost‐effectiveness of treatments. Criticisms of the usefulness of CERs derive mostly from the context of resource allocation under a constrained budget in which some decisions are based on incremental CERs. However, we show that in many cases, these decision rules are equivalent to decision rules on CERs. This follows for mutually exclusive treatments first, because a treatment is eliminated by extended dominance if and only if there is a mixed treatment with a smaller CER, where the mixing parameter lies in a certain interval. Second, after elimination of treatments by domainance and by extended dominance, resources can be allocated in order of increasing CERs. Moreover, the CER is a parameter that characterizes clinical and economical properties of a treatment independent of its comparators. © 1997 John Wiley & Sons, Ltd.

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  • Eugene M. Laska & Morris Meisner & Carole Siegel, 1997. "The usefulness of average cost‐effectiveness ratios," Health Economics, John Wiley & Sons, Ltd., vol. 6(5), pages 497-504, September.
    • Handle: RePEc:wly:hlthec:v:6:y:1997:i:5:p:497-504
    DOI: 10.1002/(SICI)1099-1050(199709)6:5<497::AID-HEC298>3.0.CO;2-V
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    References listed on IDEAS

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    1. Weinstein, Milton & Zeckhauser, Richard, 1973. "Critical ratios and efficient allocation," Journal of Public Economics, Elsevier, vol. 2(2), pages 147-157, April.
    2. Birch, Stephen & Gafni, Amiram, 1992. "Cost effectiveness/utility analyses : Do current decision rules lead us to where we want to be?," Journal of Health Economics, Elsevier, vol. 11(3), pages 279-296, October.
    3. Birch, Stephen & Gafni, Amiram, 1993. "Changing the problem to fit the solution: Johannesson and Weinstein's (mis) application of economics to real world problems," Journal of Health Economics, Elsevier, vol. 12(4), pages 469-476, December.
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    1. Christopher J.L. Murray & David B. Evans & Arnab Acharya & Rob M.P.M. Baltussen, 2000. "Development of WHO guidelines on generalized cost‐effectiveness analysis," Health Economics, John Wiley & Sons, Ltd., vol. 9(3), pages 235-251, April.

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