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 costeffectiveness 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.
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Paper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number
2005:13.
Length: 16 pages Date of creation: 07 Jun 2009 Date of revision: Handle: RePEc:hhs:oslohe:2005_013
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Find related papers by 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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