In the United States, the public health infrastructure is a network of local, state, and federal agencies entrusted with the task of implementing curative and preventive health programs and interventions, including emergency and response strategies, to improve and secure population health. Public health programs and interventions can be thought of as a production process that transforms inputs (resources) into outputs (changes in health outcomes), as illustrated in this diagram: Decisionmakers responsible for allocating resources and implementing public health programs and interventions need to understand the relationship between resources used and health outcomes achieved by the program or intervention. One analytical tool available to decisionmakers is economic evaluation. In an economic evaluation, analytic techniques are applied to identify, measure, value, and compare the costs and consequences of two or more alternative programs or interventions. In the health field, economic evaluations are used to analyze how efficiently resources have been allocated and how resources should be allocated to ultimately maximize welfare. When applied to public health programs, economic evaluation is concerned with the

• amount of resources used by a program or intervention, and
• corresponding level of health-related outcomes.

Economic evaluation is therefore an effort to

• analyze inputs (resources) and outputs (changes in health outcomes) simultaneously, and
• help decisionmakers assess whether a certain level of output is worth the amount of resources expended to produce it (given that resources are scarce and can be used for alternative purposes).

Economic evaluations provide us with criteria for deciding between alternative strategies that have different costs or consequences. The diagram below illustrates how a comparison of costs and consequences of two alternative programs provides a basis for a decision. Decisionmakers need to know the inputs or costs that the programs will need as well as the outputs or benefits that the programs will produce to make informed decisions. When an economic evaluation is used in the public health sector to ensure that limited resources are allocated as efficiently as possible, decisionmakers need to ensure that the benefits are worth the costs. In an economic evaluation, the principles from multiple disciplines (e.g., biology, epidemiology, decision sciences, and economics) are used. By combining these disciplines, the researchers can conduct an economic evaluation to produce comprehensive results that are scientifically sound.

These four forms of economic evaluation are used predominately in public health:

• Cost Analysis

  Cost analysis (CA) is a form of economic evaluation that involves the systematic collection, categorization, and analysis of the net costs of a program.

  Net costs are often calculated by subtracting the cost-of-illness (COI) from the cost of program implementation. Other cost analyses might not incorporate COI and therefore assess only program costs.

  CA can stand alone but is often nested within other economic evaluations to identify and describe all costs accrued and saved throughout the life of a program or intervention.

  CA excludes outcome measures because they are either

  • unavailable, or
  • equally effective between the chosen alternatives.

  For example, CA could be used to determine the costs of a health education and condom distribution program. (See this example in the Cost Analysis tutorial for more information.)
• Cost-Effectiveness Analysis

  Cost-effectiveness analysis (CEA) is used to compare the costs of alternative intervention strategies that produce a common health effect.

  Such effect measures are often expressed in physical or natural health units and can include final outcomes (e.g., life years gained or number of cases prevented) as well as intermediate outcomes (e.g., mean reduction in diastolic blood pressure or reduced cases of child maltreatment).

  CEA derives a ratio of cost per unit of health outcome as a summary measure.

  For example, CEA could be used to compare a newly developed vaccine treatment with an existing one in terms of cost per case of smallpox prevented in the target population.
• Cost-Utility Analysis

  Cost-utility analysis (CUA) is a unique form of economic evaluation that combines life years saved with the quality of life during those years.

  CUA is a form of cost-effectiveness analysis that attempts to capture timing and duration of disease and disability by comparing the utility associated with different health outcomes.

  Utility represents a person's preference (or utility) for a preferred outcome (or health state). CUA typically measures outcomes in quality-adjusted life years (QALYs) and disability-adjusted life years (DALYs).

  CUA is measured by the cost-utility ratio and can be expressed as the dollar value per QALY or DALY saved.

  For example, CUA could be used to compare the cost per QALY from an anthrax vaccination program with the cost per QALY from no vaccination.
• Cost-Benefit Analysis

  Cost-benefit analysis (CBA) is a form of economic evaluation that standardizes both costs and benefits in dollars and provides a list of all costs and benefits accrued during a period.

  Incongruent cost and benefit timelines are adjusted, and summary measures for a CBA are typically presented as a single value (i.e., net present value [NPV]).

  For example, CBA could be used to compare the net benefits of a smallpox vaccination program targeting population subgroups at risk with the net benefits of a program targeting the entire population.

The decision is made on the basis of

1. the alternatives to be compared and whether outcomes are to be examined, and
2. the decision-making level.

Please click this link:

Framing an Economic Evaluation.

The Framing tutorial, which describes the first step in an economic evaluation, will appear in a new browser window.