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.
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Because CEA is comparative, an intervention can only be considered cost effective compared to something else.
- 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.
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.
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
Sexually Transmitted DiseasesCalculate 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 |
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
Childhood Vaccination ProgramCosts 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.
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.