Cost Effectiveness Analysis

Introduction Cost Effectiveness Analysis (CEA) is a type of economic evaluation that examines both the costs and health outcomes of alternative intervention strategies. CEA compares the cost of an intervention to its effectiveness as measured in natural health outcomes (e.g., "cases prevented" or "years of life saved").

CEA results are presented in a cost-effectiveness ratio, which expresses cost per health outcome (e.g., cost per case prevented and cost per life year gained). CEA is generally used to either: compare alternative programs with a common health outcome, or assess the consequences of expanding an existing program.

CEA was initially applied in the clinical area but has recently been used to evaluate health policies, programs, and interventions. Importantance Decisionmakers are often faced with the challenges of resource allocation. Resources are scarce; therefore, they must be allocated judiciously. CEA is used to identify the most cost-effective strategies from a set of options that have similar results. For example, the federal government might have to allocate scarce resources to: 1. provide a new facility to assist in the development and procurement of vaccines, or 2. enhance the current public health vaccine delivery. These options have a common health outcome: the number of cases of a disease prevented by the vaccine. CEA can be used to identify the option that prevents the most cases at the least cost.

CEA differs from cost benefit analysis (CBA) and cost utility analysis (CUA) in that:

CEA expresses outcomes in natural units (e.g., "cases prevented" or "number of lives saved"), whereas CBA assigns dollar values to the outcomes attributable to the program, and CUA is a specialized form of CEA that includes a quality-of-life component associated with morbidity using common health indices such as quality-adjusted life years (QALYs) and disability-adjusted life years (DALYs).

Advantages of CEA over CBA and CUA Compared with CBA and CUA, CEA is:

less time- and resource-intensive, easier to understand, and more readily suited to decision making.

Because CEA uses a particular outcome measure that must be common among the programs being considered, its value is limited when the programs have different outcomes. To overcome this limitation, CEA uses more general summary measures (e.g., "number of lives saved"). For example, compare a smoking prevention program targeted at adolescents with a smoking cessation program targeted at committed smokers. The prevention campaign results might be presented as "cost per student smoker averted" whereas the smoking cessation program might be measured by "cost per quitter." To compare programs and better allocate resources, you could present results of both programs using a common outcome measure (e.g., "cost per life-year gained").

CEA can be used when a need exists to identify and isolate programs that are wasting resources. For example, follow-up calls conducted 6 months after a group-based smoking cessation program began might reveal that very few participants have indeed quit smoking. If so, the decisionmaker might cut the group program entirely from the list of possible treatment regimens or form a team to research better methods of group program treatment.