Principles of Economic Evaluation (Cost-Effectiveness in Health Care)

Vocabulary flashcards covering key terms in economic evaluation for health care.

Incremental analysis

A comparison of two or more interventions focusing on differences in costs and outcomes to compute the ICER.

ICER (Incremental Cost-Effectiveness Ratio)

The ratio of the difference in costs to the difference in health outcomes between two options.

ACER (Average Cost-Effectiveness Ratio)

Cost divided by outcome for a single intervention (e.g., total cost per QALY gained).

ACER example

ACER = total cost / total QALYs; e.g., 3,000 / 0.3 = 10,000 per QALY.

Cost-Effectiveness Threshold (CET)

The maximum amount a decision maker is willing to pay per unit of health gain (e.g., per QALY); used to judge cost-effectiveness.

Dominance (strong dominance)

When one intervention is more effective and less costly than another; the dominated option is eliminated.

Extended dominance (weak dominance)

When a combination of two programs yields greater cost-effectiveness than another option; an option with a higher ICER than a more effective alternative is considered extendedly dominated.

Cost-Effectiveness Plane

A graphical plot of incremental cost (x-axis) versus incremental effect (y-axis) with four quadrants (NW, NE, SW, SE) to visualize cost-effectiveness.

QALY (Quality-Adjusted Life Year)

A measure combining length and quality of life used as the outcome in cost-effectiveness analyses.

QALY League Table

A ranking of interventions by cost per QALY gained to guide funding decisions within a budget.

Threshold (λ or k)

The decision-maker’s willingness-to-pay per QALY; used to determine if an ICER is cost-effective.

Opportunity Cost

The health benefits foregone when resources are used for a new intervention instead of the next best alternative.

Disinvestment

withdrawing or reducing funding from less cost-effective interventions.

Cost Minimisation Analysis

Economic evaluation where outcomes are assumed equivalent; select the least costly option.

Cost Utility Analysis

Economic evaluation using utility-based outcomes (e.g., QALYs) to compare costs.

Cost-Benefit Analysis

Economic evaluation that values costs and benefits in monetary terms to produce a net benefit.

Dominated

An option that is more costly and less effective than another.

Incremental Cost

Difference in costs between two options when moving from one to another.

Incremental Effect

Difference in health outcomes between two options when moving from one to another.

Life Years Gained

A health outcome measure; used in some CE analyses as an alternative to QALYs.

GDP per Capita Threshold (historical)

Historical threshold guidance based on GDP per capita (e.g., WHO thresholds) for cost-effectiveness.

0.5x GDP per Capita Threshold

A newer, lower threshold suggesting cost-effectiveness if the ICER is below 0.5x GDP per capita in many settings.

1x GDP per Capita Threshold

A threshold equating to one times GDP per capita used in some assessments.

3x GDP per Capita Threshold

A traditional upper bound in some guidelines indicating not cost-effective if above three times GDP per capita.

NICE Threshold

The UK’s cost-effectiveness threshold context used by NICE; reflects opportunity costs and budget constraints.

Equity Weights

Adjusting QALYs or costs to reflect equity considerations (e.g., prioritising certain groups).

Fair Innings

An ethical concept weighting health gains to ensure fair opportunity to lead a full life.

Discount Rate

The rate used to convert future costs and benefits to present value in CE analyses.

Public Health Interventions in CE

Economic evaluations of population-level interventions, which may present measurement challenges.

Averaged vs Incremental Decisions

ACER looks at average cost per unit; ICER looks at the incremental change between options.

Clinical Effectiveness vs Cost-Effectiveness

Clinical effectiveness assesses health impact; cost-effectiveness weighs those impacts against costs.

Equity in Economic Evaluation

Incorporating equity considerations into CE analyses, often qualitatively, sometimes via weights.