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Cost-Effectiveness Analysis in the Health Sector when There is a Private Alternative to Public Treatment

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  • Michael Hoel

Abstract

In health economics, cost-effectiveness is defined as maximized health benefits for a given health budget. When there is a private alternative to public treatments, care must be taken when using cost-effectiveness analysis to decide what types of treatments should be included in the public program. The correct benefit measure is in this case the sum of health benefits to those who would not be treated without the public alternative and the cost savings to those who would otherwise choose private treatment. In the socially optimal ranking of treatments to be included in the public health program, treatments should be given higher priority the higher are costs per treatment for a given ratio of gross heath benefits to costs. (JEL: H42, H51, I18) Copyright 2006, Oxford University Press.

Suggested Citation

  • Michael Hoel, 2006. "Cost-Effectiveness Analysis in the Health Sector when There is a Private Alternative to Public Treatment," CESifo Economic Studies, CESifo Group, vol. 52(3), pages 500-512, September.
    • Handle: RePEc:oup:cesifo:v:52:y:2006:i:3:p:500-512
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifl011
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    Cited by:

    1. Hoel, Michael, 2007. "What should (public) health insurance cover?," Journal of Health Economics, Elsevier, vol. 26(2), pages 251-262, March.

    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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