Cost-Benefit Analysis (FINAL)

cost-benefit analysis (CBA)

assesses whether the outcomes (benefits) outweigh the inputs (costs) of a program or intervention

benefits outweigh the costs

In a single intervention do benefits or costs outweigh the other?

multiple interventions

identifying which program provides the greatest benefit

1) Future direct medical and non-medical care costs avoided (direct benefit)

2) Increased productive output due to improved health status or premature death avoided (indirect benefit)

3) Intangible benefits which are the value of improved health per se to the individual consumer of a program

What are the 3 broad categories of benefits that can arise from a health care program?

human capital approach

-The value of health benefits equal the economic productivity that those values permit

-Value of an intervention can be assessed in terms of the present value of future earnings

-wage rates

-missed time due to illness or premature death

What are the components of estimating human capital?

yearly wage rate

-For program or intervention to reduce long-term disability or death

-Income or wages should include fringe benefits

daily wage rate

-For short-term illness or disability

-Annual income ÷ number of days worked per year

willingness to pay approach

Determines how much people are willing to pay for a health care program or intervention to reduce the chance of an adverse health outcome

-open ended questions

-closed ended questions

-bidding game

-payment card

What are the bidding vehicles?

advantages of the willingness-to-pay approach

-$ value placed on indirect and intangible benefits

-Theory-based

disadvantages of the willingness-to-pay approach

-Hypothetical nature

-Validity of questions and responses (Socially desirable responses)

Net benefit (NB)

total benefits - total costs

-cost benefit ratio

-benefit cost ratio

What are the ratios used in presenting results of costs and benefits in cost-benefit analysis?