# Cost-Effectiveness Analysis

## What is cost-effectiveness analysis?

Cost-effectiveness analysis is a way to examine both the costs and health outcomes of one or more interventions. It compares an intervention to another intervention (or the status quo) by estimating how much it costs to gain a unit of a health outcome, like a life year gained or a death prevented.

idea icon

Because CEA is comparative, an intervention can only be considered cost effective compared to something else.

## What inputs are included?

• Net cost is the intervention costs minus averted medical and productivity costs.
• Changes in health outcomes are outcomes with the intervention in place minus outcomes without the intervention in place.
• Examples of health outcomes include heart attacks and deaths from heart disease.

## What output does a cost-effectiveness analysis provide?

CEA provides information on health and cost impacts of an intervention compared to an alternative intervention (or the status quo). If the net costs of an intervention are positive (which means a more effective intervention is more costly), the results are presented as a cost-effectiveness ratio. A cost-effectiveness ratio is the net cost divided by changes in health outcomes. Examples include cost per case of disease prevented or cost per death averted. However, if the net costs are negative (which means a more effective intervention is less costly), the results are reported as net cost savings.

## CEA Example (Intervention is More Effective and More Costly):

The example below presents the results from a cost-effectiveness analysisexternal icon of a screening intervention for preventing chlamydia infections among high risk women (compared to the status quo of no screening). The results are presented as a cost-effectiveness ratio. This cost-effectiveness ratio can be compared to another intervention to determine which is more cost-effective.

## Sexually Transmitted Diseases

This analysis modeled the intervention as applied to 10000 women

 Calculate Net Cost Costs of implementation (cost of testing and treatment): Cost averted (cost of treating pelvic inﬂammatory disease (PID): Net costs (positive value means money spent): \$23,844 \$13,033 \$10,811 Identify change in health outcomes: In this case, 10.6 PID cases averted Calculate cost-effectiveness ratio: Net costs/Change in health outcome = \$10,811/10.6 = \$1020 per PID case averted

## CEA Example (Intervention is More Effective and Less Costly):

In the example below, we compare the childhood vaccination programexternal icon to the status quo of no vaccination program. We can see that the costs of implementing the program are less than the medical and productivity costs averted. Because the intervention is cost saving, the results are not presented as a cost-effectiveness ratio. Instead, they are presented as net cost savings.

## Childhood Vaccination Program

 Costs of implementation: \$   7.5 billion Cost averted (medical costs & productivity losses): -\$76.4 billion Net costs (negative value means cost savings): -\$68.9 billion

For additional information, please see the example as used in the CDC Introduction to Economic Evaluation in Public Healthexternal icon online training, as well as the original study.

## How can information from a CEA be useful for decision makers?

CEA can be useful in comparing the health and cost impacts of different interventions affecting the same health outcome. It can also be useful for understanding how much an intervention may cost (per unit of health gained) compared to an alternative intervention. For example, a decision maker might ﬁnd it useful to know if an intervention is cost saving, and if not how much more would it cost to implement it compared to a less effective intervention.

## Resources

paper icon

CDC Introduction to Economic Evaluationexternal icon

Course providing a broad overview of economic evaluation methods with illustrative examples from public health

paper icon

Tufts Medical Center Cost-Effectiveness Analysis Registryexternal icon

Comprehensive database of cost-effectiveness analyses on a wide variety of diseases and treatment

Page last reviewed: October 20, 2021