9.5.2 Comparing Costs and Benefits

Knows what is Meant by: Cost-Effectiveness, Cost-Utility Analysis, Cost-Benefit Analysis and Cost-Minimisation Analysis

Cost-effectiveness analysis (CEA), cost-utility analysis (CUA), cost-benefit analysis (CBA) and cost-minimisation analysis (CMA) are commonly used methods in health economics to evaluate the costs and benefits of different healthcare interventions.

Cost-effectiveness analysis:

CEA compares the costs of a healthcare intervention with the outcomes achieved in terms of health improvements, such as a reduction in disease symptoms or increased life expectancy. It calculates the cost per unit of health outcome, such as cost per additional year of life gained or cost per additional quality-adjusted life year (QALY) gained.

Cost-utility analysis:

CUA is a type of CEA that focuses on health outcomes that are measured in QALYs, which combine the quantity and quality of life gained from a healthcare intervention. It calculates the cost per QALY gained.

Cost-benefit analysis:

CBA is a method that compares the costs and benefits of a healthcare intervention in monetary terms. It calculates the net present value of the costs and benefits over the lifetime of the intervention, taking into account the time value of money.

Cost-minimisation analysis:

CMA compares the costs of two or more healthcare interventions that have equivalent clinical effectiveness. It determines which intervention is the most cost-effective.

For example, suppose a new drug is developed to treat a chronic condition such as diabetes. The drug is expected to reduce the frequency of hospitalisation and the need for expensive medical procedures. CEA can be used to determine the cost-effectiveness of the new drug compared to the standard treatment. CUA can be used to evaluate the cost per QALY gained by using the new drug. CBA can be used to compare the monetary costs and benefits of using the new drug. CMA can be used to compare the costs of the new drug with those of the standard treatment.

Type of Economic Evaluation	Description
Cost-effectiveness analysis (CEA)	Measures costs in monetary units and effects in clinical outcomes, such as life-years gained or quality-adjusted life-years (QALYs) gained. The result is a cost-effectiveness ratio (CER) that shows the cost of each unit of outcome.
Cost-utility analysis (CUA)	Measures costs and outcomes in QALYs gained. The result is a cost-utility ratio (CUR) that shows the cost of each QALY gained.
Cost-benefit analysis (CBA)	Measures costs and benefits in monetary units. The result is a benefit-cost ratio (BCR) that compares the monetary value of the benefits to the costs.
Cost-minimization analysis (CMA)	Compares the costs of two or more interventions that have equivalent clinical outcomes. The goal is to find the least expensive option.

References:

1. Drummond, M. F., Sculpher, M. J., Claxton, K., Stoddart, G. L., & Torrance, G. W. (2015). Methods for the economic evaluation of health care programmes. Oxford university press.