Cost Effectiveness Analysis Page 1    HHS    CDC

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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 created in the 1970s as a tool for healthcare decision making, primarily to avoid controversy regarding valuation of health-related outcomes in dollars.
CEA was initially applied in the clinical arena but has recently been used to evaluate health policies, programs, and interventions.
Why Is CEA Important?
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").
A CEA Example
This table lists factors that should be considered by a decisionmaker when choosing between alternative programs: expanding access for a breast cancer screening program to women with risk factors aged 40–69 years rather than 50–69 years.
National Breast and Cervical Cancer Early
Detection Program (NBCCEDP)
Factor Value
Decisionmaker NBCCCEDP
Resources Congressional appropriations
Alternatives Women aged 40–69 versus 50–69 years
Group affected Low income women
Cost of including women aged 40–49 years Resources that could be used to:
  • screen more women for cervical cancer,
  • increase the percentage of eligible women aged 50–69 years receiving breast cancer screening, and
  • expand the program to cover treatment costs.
Benefits of including women aged 40–49 years
  • increase in early detection rates, and
  • possible decreased mortality attributable to breast cancer that is left untreated for too long.
CEA could be used by the decisionmaker to provide empirical results that account for the costs and consequences associated with alternative programs.
The decisionmaker's role is to arrive at the choice that will maximize the health benefits to the population.
A host of factors goes into the decision-making process (e.g., timing and political consequences).
Beside these, individual or group value judgments also play a part in arriving at the final decision.
For instance, it might NOT be cost effective for a managed-care provider to cover mammographies for all beneficiaries aged 50–69 years, compared with covering just those who are at high risk (e.g., having a family history of breast cancer, white race, or late age at menopause).
Nevertheless, political and social pressures might force the provider to adhere to the recommendation of the NBCCEDP and cover all female beneficiaries aged 50–69 years.
When Can We Use CEA?
CEA is used most appropriately in situations having:
Interventions with Shared Goals
CEA is useful when the primary objective of the study is to identify the most cost-effective strategy from a group of alternatives that can effectively meet a common goal and are often competing for the same resources.
For example, to increase smoking cessation among adult smokers, a policy maker could compare a self-help treatment plan with a group-based intervention.
A Specific Population
CEA results might not be generalizable to all populations. Because each population has specific characteristics (e.g., prevalence of disease, or access to care), each might have different program costs, productivity losses, and medical expenses.
Inequalities in risk factors and exposure levels can also result in different outcomes.
For example, a mass media campaign might be the best intervention to increase smoking cessation among adolescents, whereas a prenatal health education program might be a better intervention to increase smoking cessation among pregnant women.
Sound Evidence
CEA can provide solid justification for a program. Empirical evidence might be needed to provide backing for the increased level of program funding or a switch from one to the other.
For example, a CEA will take into account the savings a managed-care organization will ultimately accrue by supporting prenatal smoking cessation education programs.
If the program is cost effective in raising the birth weights of infants, it will most likely encourage program managers to provide more financial support.
Possibly Inefficient Programs
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.
Test Your Understanding
Please answer the questions before you look at the "Our Answers" section.
  1. CEA is used widely in public health to evaluate alternative programs or policies to gain the maximal health outcome for a given level of resources.
    True   False
  2. A CEA measures health outcomes in physical units (e.g., quality-adjusted life years).
    True   False
  3. A CEA would be useful for an organization to determine the return on investment from a health program.
    True   False
  4. For a CEA to be useful in comparing two different programs, common health outcomes must be employed.
    True   False
  5. If a CEA for a program expansion proves not to be cost effective, decisionmakers should remove the program from their list of possible investment choices.
    True   False
  6. The results of a CEA evaluating a vaccination program designed to reduce infant mortality in a developing country could be used by a program manager in the United States for evidence of the program's cost effectiveness.
    True   False
Our Answers
  1. CEA is used widely in public health to evaluate alternative programs or policies to gain the maximal health outcome for a given level of resources.
    True.
  2. A CEA measures health outcomes in physical units (e.g., quality-adjusted life years).
    True. Specifically, CUA, a special variant of CEA, examines the quality component of health outcomes.
  3. A CEA would be useful for an organization to determine the return on investment from a health program.
    False. A CBA measures health outcomes in dollars and should be used to determine the return on investment for a particular health program.
  4. For a CEA to be useful in comparing two different programs, common health outcomes must be employed.
    True.
  5. If a CEA for a program expansion proves not to be cost effective, decisionmakers should remove the program from their list of possible investment choices.
    False. Programs with implicit political or social value can be implemented, whether or not they are cost effective.
  6. The results of a CEA evaluating a vaccination program designed to reduce infant mortality in a developing country could be used by a program manager in the United States for evidence of the program's cost effectiveness.
    False. The risk factors and exposures of vaccine-preventable diseases among children in the developing world are different than those experienced by children in developed nations, which would result in dissimilar outcomes that should not be compared.
 Framing CEAJump to page 2.
 Which Outcomes are Relevant in CEA?Jump to page 3.
 Interpreting CEA ResultsJump to page 4.
 Glossary — CEAJump to page Glossary.
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Centers for Disease Control and Prevention
U.S. Department of Health & Human Services
Hosted by
Office of Workforce and Career Development
Acknowledgements
Produced by
Prevention Effectiveness Branch
Division of Prevention Research and Analytic Methods
Epidemiology Program Office
Funded by
Office of Terrorism Preparedness and Emergency Response
Developed by
Norbert Denil, OWCD (Webmaster)
Kwame Owusu-Edusei, NIOSH (Content)
Kakoli Roy, OWCD (Project Supervision)
Amanda Schofield (Content)
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
Norbert Denil (Site design and production) 321-633-6150 ngd1@cdc.gov
Ara Zohrabyan (Technical content) 404-498-6322 aqz0@cdc.gov

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