Cost-Effectiveness Analysis POLARIS Policy, Performance, and Evaluation

cost benefit analysis in healthcare

It further stipulates that project risk should be reflected in the quantification of the costs and benefits and not in the discount rate. This is largely consistent with the federal Department of Prime Minister and Cabinet (PM&C) [33] guidance. However, in specific PM&C guidance related to environmental impacts [33], a declining long-term discount rate is recommended, which drops gradually from 5.4% for periods of analysis over 30 years, to 3.7% for periods over 301 years. NSW line agencies (Health Infrastructure [37], Transport for NSW [8] and NSW Planning, Industry and Environment [7]) guidance documents cite NSW Treasury [4] guidance.

cost benefit analysis in healthcare

The concern is that this may lead to prioritising interventions that primarily benefit high-wage earners over low-wage earners and those doing unpaid labour (e.g. caregiving and housework). It should be noted, however, that the market value approach that we used measures unpaid household work based on the population average wage, which differs from the conventional method of valuing household based on the average wage of a paid household worker or carer. While there exists guidance on conducting CBAs for government policies [13,14,15], it generally is not as precise as ‘reference cases’ available for CEAs that specify the exact economic assumptions to be used in pharmacoeconomic evaluations. This is likely because CBA has not been used as extensively as CEA for informing decisions on specific healthcare resource allocation. While CBA is used to evaluate a broader range of public sector initiatives across multiple sectors, CEA guidelines are generally used in the health sector only.

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The TVC estimate was lowest (£69–£191) when benefits were valued in terms of productivity loss averted due to ill health and premature mortality, particularly if the friction cost method was used, and highest (£206–£1417) when VSL methodology was used. When an individual WTP for an additional QALY gained was used instead, the TVC estimates (£262–£373) were generally higher than that obtained by valuing productivity gains but lower than that obtained using VSL methods. But beyond what is a cost benefit analysis the potential of providing such benefits, the use of cost analytics represents a progressive approach aimed at representing resource consumption, expenses and revenue, and operational data at a patient encounter level. As such, because it also conforms with the essential focus an requirements of value-based care, it represents an aspect of our nation’s healthcare system that is likely to endure through the many changes that come about as a result of the change in administrations.

  • Although it presents an incipient amount, the Brazilian case also deserves special attention, since health represents 9% of its GDP (IBGE, 2021), with a broad public health sector, which currently serves ~74% of the population (National Health Agency, 2021).
  • Various government line agencies have developed sector-specific CBA guidance that use state treasury guidelines as a framework but provide specific practical advice tailored to sector-specific projects [8, 36,37,38].
  • Firstly, CBA is the most common tool for policy appraisal across various sectors, such as transport and the environment [7, 8] and given that the Cabinet consists of government ministers from diverse sectors, an evaluation framework that is familiar to Cabinet members may assist decision-making.
  • As they are reference works of this sampling, it is possible to consider these studies as basic and fundamental to the development of the logic of this subject.
  • Logic models should be developed to identify all potential impacts (economic, social and environmental) of the preventive health intervention.
  • Potential participants will come from a range of employers, including government agencies, intergovernmental organizations, foundations, universities, non-profits, and other organizations.

The discount rate used in economic analyses is an important topic that remains hotly debated nationally and internationally, with little consensus amongst academics and government departments [29, 59, 90]. Key topics of debate include whether the basis of the discount rate for public policy appraisals should be the opportunity cost of capital, the social rate of time preference, or variations/combinations of the two [4, 33, 59, 62, 63, 91]. There is also little consensus on how to calculate the actual discount rate to be used and whether the rate should vary over time, by sector or by level of project risk, and whether it should incorporate equity considerations for future generations [29, 59, 62, 91].

Managing the True Costs of Health Care: A Roadmap to Cost Analytics

One of [7]’s justification for the $150,000 threshold came from the World Health Organization’s suggestion that the threshold should be two to three times per capita income, which was around $54,000 in 2014. The finding that the FC method yields much smaller benefit estimates than the HC method is likewise intuitive, because the FC method only takes into account temporary losses during the friction period while the HC method assumes lifetime losses during the entire period affected by morbidity and mortality. Future deaths averted were discounted at 3.5% per annum back to the reference year, i.e. the year in which the vaccination programme is initiated. Subsequently, the value attached to averted mortality was discounted further, depending on the method used.

  • One of [7]’s justification for the $150,000 threshold came from the World Health Organization’s suggestion that the threshold should be two to three times per capita income, which was around $54,000 in 2014.
  • Since time saved by the caregiver can be given a monetary value using labor market valuations, for example, by using the federal minimum wage rate, the benefits of the TAP were straight-forward to estimate.
  • Our QM approach with a £23,000/QALY WTP is analogous to NICE’s cost-effectiveness reference case, which has a cost-effectiveness threshold of £20,000–£30,000/QALY [9], although our approach is based on individual rather than societal WTP arguments.
  • NSW Treasury references the weighted average cost of capital (WACC) calculated by the Independent Pricing and Regulatory Tribunal to justify the 7% discount rate for primary analyses; however, current estimates of the WACC (July 2019) have been lowered to 4.7% [67].
  • Applying different approaches to monetise benefits in CBA can lead to widely varying outcomes on public health interventions such as vaccination.

However, analysts should take care in the accounting of benefits resulting from the intervention. The decision to account for avoided costs on the cost or benefit side of the equation in a CBA will not impact the NPV results, but the BCR will differ. In CEA and CUA of health interventions, avoided costs resulting from the intervention are accounted for on the cost side of the equation. Cost-effectiveness analysis (CEA) provides a formal assessment of trade-offs involving benefits, harms, and costs inherent in alternative options. CEA has been increasingly used to inform public and private organizations’ reimbursement decisions, benefit designs, and price negotiations worldwide. Despite the lack of centralized efforts to promote CEA in the United States, the demand for CEA is growing.

Additional file 4:

The FC method purports to measure the ‘actual’ productivity loss to society from an employer’s perspective by considering the time and related costs (e.g. hiring and training costs) needed to fully restore production levels with a replacement worker. Data extraction involved JA initially extracting data on five documents and then presenting the initial data categories and results to RC and MM. Following data extraction, an analytical review was undertaken by JA to ascertain the similarities and differences between the recommended CBA methodology across the different departments and agencies, specifically those that impact economic analyses of preventive health policies and interventions. The assessment of CBA components that have relatively good agreement, poor agreement and flexibility in application involved a deliberative process with all authors until consensus was reached.

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