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Ratio‐based and net benefit‐based approaches to health care resource allocation: proofs of optimality and equivalence

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  • Eugene M. Laska
  • Morris Meisner
  • Carole Siegel
  • Aaron A. Stinnett

Abstract

Both incremental cost‐effectiveness ratios and net benefits have been proposed as summary measures for use in cost‐effectiveness analyses. We present a unifying proof of the optimality and equivalence of ICER‐ and net benefit‐based approaches to the health resource allocation problem, including both ‘fixed budget’ and ‘fixed price’ decision rules. If internally consistent willingness‐to‐pay values are used, ratio‐ and net benefit‐based decision rules identify the same optimal allocation. Because they have identical resource allocation implications, use of one or other of the two approaches must be based on other criteria, such as their behaviour under conditions of uncertainty. Copyright © 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • Eugene M. Laska & Morris Meisner & Carole Siegel & Aaron A. Stinnett, 1999. "Ratio‐based and net benefit‐based approaches to health care resource allocation: proofs of optimality and equivalence," Health Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 171-174, March.
  • Handle: RePEc:wly:hlthec:v:8:y:1999:i:2:p:171-174
    DOI: 10.1002/(SICI)1099-1050(199903)8:2<171::AID-HEC424>3.0.CO;2-E
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    File URL: https://doi.org/10.1002/(SICI)1099-1050(199903)8:23.0.CO;2-E
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    References listed on IDEAS

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    1. Tambour, Magnus & Zethraeus, Niklas & Johannesson, Magnus, 1997. "A Note on Confidence Intervals in Cost-Effectiveness Analysis," SSE/EFI Working Paper Series in Economics and Finance 181, Stockholm School of Economics.
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    3. Stinnett, Aaron A. & Paltiel, A. David, 1996. "Mathematical programming for the efficient allocation of health care resources," Journal of Health Economics, Elsevier, vol. 15(5), pages 641-653, October.
    4. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
    5. Johannesson, Magnus & Weinstein, Milton C., 1993. "On the decision rules of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 12(4), pages 459-467, December.
    6. David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc.
    7. 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.
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    Cited by:

    1. Al, Maiwenn J. & Feenstra, Talitha & Brouwer, Werner B. F., 2004. "Decision makers' views on health care objectives and budget constraints: results from a pilot study," Health Policy, Elsevier, vol. 70(1), pages 33-48, October.
    2. Elamin H. Elbasha & Mark L. Messonnier, 2004. "Cost‐effectiveness analysis and health care resource allocation: decision rules under variable returns to scale," Health Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 21-35, January.
    3. Michał Jakubczyk & Bogumił Kamiński, 2010. "Cost‐effectiveness acceptability curves – caveats quantified," Health Economics, John Wiley & Sons, Ltd., vol. 19(8), pages 955-963, August.
    4. Morris Meisner & Eugene M. Laska & Carole Siegel & Joseph Wanderling, 2002. "The familywise error rate of a simultaneous confidence band for the incremental net health benefit," Health Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 275-280, April.
    5. McKenna, Claire & Chalabi, Zaid & Epstein, David & Claxton, Karl, 2010. "Budgetary policies and available actions: A generalisation of decision rules for allocation and research decisions," Journal of Health Economics, Elsevier, vol. 29(1), pages 170-181, January.
    6. Dorte Gyrd‐Hansen, 2003. "Willingness to pay for a QALY," Health Economics, John Wiley & Sons, Ltd., vol. 12(12), pages 1049-1060, December.
    7. George Laking & Joanne Lord & Alastair Fischer, 2006. "The economics of diagnosis," Health Economics, John Wiley & Sons, Ltd., vol. 15(10), pages 1109-1120, October.
    8. Palmer, Stephen & Smith, Peter C., 2000. "Incorporating option values into the economic evaluation of health care technologies," Journal of Health Economics, Elsevier, vol. 19(5), pages 755-766, September.
    9. Mohan V. Bala & Gary A. Zarkin & Josephine Mauskopf, 2008. "Presenting results of probabilistic sensitivity analysis: the incremental benefit curve," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 435-440.
    10. Kobelt, G., 2013. "Health Economics: An Introduction to Economic Evaluation," Monographs, Office of Health Economics, number 000004.
    11. Eugene M. Laska & Morris Meisner & Carole Siegel & Joseph Wanderling, 2002. "Statistical determination of cost‐effectiveness frontier based on net health benefits," Health Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 249-264, April.
    12. Castillo-Riquelme, Marianela & Chalabi, Zaid & Lord, Joanne & Guhl, Felipe & Campbell-Lendrum, Diarmid & Davies, Clive & Fox-Rushby, Julia, 2008. "Modelling geographic variation in the cost-effectiveness of control policies for infectious vector diseases: The example of Chagas disease," Journal of Health Economics, Elsevier, vol. 27(2), pages 405-426, March.

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