Cost Benefit Analysis Page 2    HHS    CDC

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 IntroductionJump to page 1.
Framing a CBA
The first stage in conducting a CBA is framing the study, which determines the research framework of the study.
We will use Influenza vaccination to illustrate this discussion of Framing.
Framing a CBA involves these six steps:
  1. Defining the problem
  2. Identifying the interventions
  3. Defining the audience
  4. Defining the perspective
  5. Defining the time frame and analytic horizon
  6. Defining the discount rate.
We will explain these steps in the next sections.
1. Defining the Problem
The study problem must be identified at the outset of any analysis. A clearly stated problem defines the objective of the study. At this initial stage of the study we must consider:
  • what questions need to be answered, and
  • which aspects of the problem need to be explained.
Influenza Vaccination Example:
CBA of a Strategy To Vaccinate Healthy Working Adults Against Influenza
Influenza is a major cause of morbidity and mortality.
Studies using different definitions of influenza illness cases that include both symptomatic and asymptomatic infections estimate annual infection rates in the range from 1% to >20% of the U.S. population.
This study was conducted in 2001 by K. Nichol to assess the economic implications of a strategy for annual vaccination of working adults in the United States aged 18–64 years.
Persons aged >64 years and other persons at high risk are more vulnerable to serious complications of influenza and are specifically targeted for annual vaccinations against influenza.
Until recently, priority groups for annual vaccination did not include the working adult population.
Previous trial studies assessing influenza vaccination benefits among healthy working adults did not demonstrate a clear association between vaccination and economic benefits.
At this first step:
  • The study problem was:
    • To compare the benefits of a program of nationwide vaccination of healthy working adults with its costs.
  • The questions that needed to be answered were:
    • What is the economic impact of influenza on the healthy adult population in USA?
    • What would be the cost of implementing the vaccination program?
    • What would be the benefits of implementing the program?
  • The aspect of the problem that needed to be explained was:
    • Benefit and cost estimates were needed to compare the efficiency of such a vaccination strategy with the results of previous economic evaluation studies of influenza vaccination programs.
We will refer to additional aspects of this "Influenza vaccination example" in the explanations of each of these Framing steps.
2. Identifying Interventions
The scope of the study and the variety of outcomes to be included are determined to a large extent by the nature of the programs under consideration.
Often the study problem itself or the decisions made by policy makers specify the interventions to be analyzed.
These questions highlight the various aspects that will help in identifying the interventions:
  1. What is the nature of each intervention (e.g., a vaccination or a screening program)?
  2. What is the technology used for the intervention (e.g., an MRI test or a blood test)?
  3. What are the target population, the delivery site, and the personnel for delivering the intervention?
  4. What are the options?
    If no alternatives are stated in the program, we must compare the proposed project with the status quo.
Influenza Vaccination Example: Interventions
Vaccination
Subdermal injection of inactivated influenza virus vaccine
Healthy working adults aged 18–64 years
Low-cost settings (e.g., work site clinics, community health department clinics, and public clinics in drug stores and grocery stores)
Proposed vaccination strategy compared with the status quo
3. Defining the Audience
Understanding what information the audience needs and how the study results will be used are the major factors that must be considered at this stage.
These questions will help to identify the audience:
  1. Who will be using the results of the analysis?
  2. What information does the audience need?
  3. How will the results be used?
Influenza Vaccination Example: Audience
Regarding the study audience for the influenza vaccination program, we can answer the following questions:
  1. Who will use the results of the analysis?
    • Public health policy decisionmakers at local, state, and federal levels
    • Health research institutions and scientists
  2. What information does the audience need?
    • What are potential benefits of a nationwide immunization strategy?
    • What are the direct and indirect costs of the program?
  3. How will the results be used?
    • To determine the economic impact of a nationwide influenza vaccination strategy for working age adults.
    • To compare the results with those of earlier studies that did not incorporate indirect costs associated with productivity losses averted.
    • To assess whether the findings from 1994–1995, 1997–1998, and 1998–1999 trial studies on the benefits of influenza vaccination can be generalized to other influenza seasons and to the general working adult population.
4. Defining the Perspective
Usually cost benefit analyses are conducted from a societal perspective. Thus all benefits and costs are considered.
The results then indicate whether the benefits to the society as a whole outweigh the total costs of a proposed project.
When using a narrower perspective, we should include only the benefits and costs relevant to that specific perspective.
For instance, a CBA from the patient perspective will estimate the benefits the patient will receive and the costs that patient will incur as a result of implementing the program.
The CBA can be conducted from any of these perspectives — depending on the audience:
  • Patient perspective
  • Provider perspective
  • Payer perspective
  • Health-care system perspective
  • Government perspective
  • Societal perspective
Influenza Vaccination Example: Perspective
The CBA was conducted from a societal perspective. The benefits and costs considered were as follows:
Benefits Costs
Direct costs averted
  • Health-care provider visit costs
  • Hospitalization costs
Direct costs
  • Vaccination costs
  • Side effect costs
Productivity losses averted
  • Work absenteeism costs averted
  • Future lifetime earnings preserved as a result of deaths prevented
  • Reduced work effectiveness averted costs
Productivity losses
  • Productivity losses attributable to vaccination
  • Productivity losses attributable to potential side effects
An analysis from the patient perspective will include only benefits and costs incurred by patients. Productivity losses are composed mostly of work absenteeism.
Patients who take paid sick leave (provided as a work benefit) will not consider these productivity losses as a cost they incur.
Similarly, vaccinations provided free of charge by public health departments and employers will not be considered as costs for patients.
5. Defining the Time Frame and Analytic Horizon
The time frame and the analytic horizon are largely determined by the treatments or interventions under consideration.
The analytic horizon is usually longer than the time frame because the majority of interventions or treatments produce multiple health and nonhealth outcomes for periods far exceeding the durations of the interventions or treatments.
Although theoretically possible, the inclusion in a study of all possible outcomes and related benefits is usually difficult and costly because of practical considerations (e.g., uncertainties associated with expected effects, time constraints, and resource constraints).
Keeping in mind the practical feasibility matters and the objective of comprehensive inclusion of relevant costs and benefits, we have to choose a time frame and an analytic horizon that are:
  • short enough that the outcomes are not unacceptably uncertain, but
  • long enough:
    • to capture fully the costs and benefits that can readily be associated with the program, and
    • to account for seasonal variations in program activity levels and targeted health problems.
Influenza Vaccination Example: Program Time and Analytic Horizon
The analytic horizon for the model was 1 year. The 1-year period was allowed to track the costs and benefits of a nationwide vaccination campaign and of side effects (e.g., Guillain-Barré syndrome).
6. Defining the Discount Rate
Discounting makes it possible to compare benefits and costs that occur at different times by adjusting their values according to the time preference corresponding to the chosen perspective.
CDC recommends that a 3% social discount rate be used in analyses.
The discount rate is one parameter that can be varied in a sensitivity analysis to test its impact on the results of analysis and to make the results of studies based on different discount rates comparable.
Influenza Vaccination Example: Discount Rate
The study was conducted from a societal perspective; the discount rates used in the model were 5% and 3%.
The worst-case scenario (in terms of vaccine efficacy as determined by the match between circulating viruses and corresponding vaccine strains) used the 5% discount rate, while the base-case and best-case scenario results were estimated at the 3% discount rate.
Test Your Understanding
Please answer the questions before you look at the "Our Answers" section.
  1. What distinguishes CBA from all the other health economic evaluation analysis?
  2. Typically, CBA is conducted from which perspective?
  3. The analytic horizon for a CBA is typically shorter than the time frame.
    True   False
  4. CDC recommends that a 3% social discount rate be used in analyses.
    True   False
  5. CBA is based on the concepts and theoretical framework of the field of economics called welfare economics.
    True   False
  6. Averted disease cost is an example of a cost in CBA.
    True   False
  7. A CBA can be conducted from the societal perspective only.
    True   False
  8. Productivity loss is an example of a cost to the patient.
    True   False
  9. CBA helps to choose the best alternative among programs that are equally successful in achieving a desired health outcome.
    True   False
  10. CBA is also used to compare health-related interventions to those in other economic sectors.
    True   False
Our Answers
  1. What distinguishes CBA from all the other health economic evaluation analysis?
    The main difference is that all measures are in monetary (dollar) terms.
  2. Typically, CBA is conducted from which perspective?
    The societal perspective.
  3. The analytic horizon for a CBA is typically shorter than the time frame.
    False. The analytic horizon is normally longer then the time frame.
  4. CDC recommends that a 3% social discount rate be used in analyses.
    True.
  5. CBA is based on the concepts and theoretical framework of the field of economics called welfare economics.
    True.
  6. Averted disease cost is an example of a cost in CBA.
    False. Averted disease cost is a cost that was prevented from occurring, so it is a benefit resulting from the program.
  7. A CBA can be conducted from the societal perspective only.
    False. It can also be conducted from other perspectives.
  8. Productivity loss is an example of a cost to the patient.
    True. This is money lost to the patient because of the disease.
  9. CBA helps to choose the best alternative among programs that are equally successful in achieving a desired health outcome.
    True.
  10. CBA is also used to compare health-related interventions to those in other economic sectors.
    True, if all costs and benefits are expressed in the same terms (dollars).
 Valuation of Health OutcomesJump to page 3.
 Calculating and Presenting the Summary Measures Jump to page 4.
 Glossary — Cost Benefit AnalysisJump to page Glossary.
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Centers for Disease Control and Prevention
U.S. Department of Health & Human Services
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Acknowledgements
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Ara Zohrabian, OWCD (Content)
Based on earlier, paper-based Framing &
Cost Analysis self-study guides by
Phaedra Corso, NCIPC
Odile Ferroussier, NCHSTP
Amanda Schofield
Additional acknowledgements
Vilma Carande-Kulis, OCSO
Sajal Chattopadhyay, OSI
Martin Meltzer, NCID
Contacts
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