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Economic Evaluation of Health-care Programmes: Is CEA Better than CBA?

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  • Amiram Gafni

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    Abstract

    It has been noted earlier that during the same period that the contingent valuation (CV) method evolved and became the most commonly used method of valuing environmental projects, the development in health economics was instead been towards cost–effectiveness analysis (CEA). Recently there has been a growing interest in the use of CEA, where QALYs (quality-adjusted life-years) are used as a measure of effectiveness, as the method of evaluation for environmental projects. The purpose of this paper is to answer the question – is CEA a superior method to CBA (both theoretically and empirically) to provide information to decision makers for use in decisions on resource allocation in health. The paper deals with the following topics: the underlying theoretical foundation for CEA; is CEA free of income distribution considerations?; is QALY a superior measure to WTP?; the usefulness of incremental CE ratio (ICER) to determine resource allocation. The paper concludes that there is neither theoretical nor practical support for the claim about the superiority of CEA. Copyright Springer 2006

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    File URL: http://hdl.handle.net/10.1007/s10640-006-0008-x
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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 34 (2006)
    Issue (Month): 3 (July)
    Pages: 407-418

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    Handle: RePEc:kap:enreec:v:34:y:2006:i:3:p:407-418

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    Web page: http://www.springerlink.com/link.asp?id=100263

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    Keywords: I10 (Health – General); I19 (Health – Other);

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    1. Birch, Stephen & Gafni, Amiram, 1993. "Changing the problem to fit the solution: Johannesson and Weinstein's (mis) application of economics to real world problems," Journal of Health Economics, Elsevier, vol. 12(4), pages 469-476, December.
    2. Culyer, Anthony J. & Evans, Robert G., 1996. "Mark Pauly on welfare economics: Normative rabbits from positive hats," Journal of Health Economics, Elsevier, vol. 15(2), pages 243-251, April.
    3. Bleichrodt, Han & Quiggin, John, 1999. "Life-cycle preferences over consumption and health: when is cost-effectiveness analysis equivalent to cost-benefit analysis?," Journal of Health Economics, Elsevier, vol. 18(6), pages 681-708, December.
    4. Weinstein, Milton & Zeckhauser, Richard, 1973. "Critical ratios and efficient allocation," Journal of Public Economics, Elsevier, vol. 2(2), pages 147-157, April.
    5. Alan Diener & Bernie O'Brien & Amiram Gafni, 1998. "Health care contingent valuation studies: a review and classification of the literature," Health Economics, John Wiley & Sons, Ltd., vol. 7(4), pages 313-326.
    6. Bleichrodt, Han, 1995. "QALYs and HYEs: Under what conditions are they equivalent?," Journal of Health Economics, Elsevier, vol. 14(1), pages 17-37, May.
    7. Wagstaff, Adam, 1991. "QALYs and the equity-efficiency trade-off," Journal of Health Economics, Elsevier, vol. 10(1), pages 21-41, May.
    8. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
    9. Dolan, Paul & Edlin, Richard, 2002. "Is it really possible to build a bridge between cost-benefit analysis and cost-effectiveness analysis?," Journal of Health Economics, Elsevier, vol. 21(5), pages 827-843, September.
    10. Weinstein, Milton C. & Manning, Willard Jr., 1997. "Theoretical issues in cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 121-128, February.
    11. Blomqvist, Ake, 2002. "QALYs, standard gambles, and the expected budget constraint," Journal of Health Economics, Elsevier, vol. 21(2), pages 181-195, March.
    12. Gafni, Amiram & Birch, Stephen, 1995. "Preferences for outcomes in economic evaluation: An economic approach to addressing economic problems," Social Science & Medicine, Elsevier, vol. 40(6), pages 767-776, March.
    13. Johannesson, Magnus & Jonsson, Bengt, 1991. "Economic evaluation in health care: Is there a role for cost-benefit analysis?," Health Policy, Elsevier, vol. 17(1), pages 1-23, February.
    14. Kenkel, Don, 1997. "On valuing morbidity, cost-effectiveness analysis, and being rude," Journal of Health Economics, Elsevier, vol. 16(6), pages 749-757, December.
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    Cited by:
    1. Richard D. Smith & Tracey H. Sach, 2009. "Contingent valuation: (still) on the road to nowhere?," Health Economics, John Wiley & Sons, Ltd., vol. 18(8), pages 863-866.

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