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

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

    (Department of Health Care Organization and Policy, University of Alabama at Birmingham, USA)

Registered author(s):

    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.

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    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 8 (1999)
    Issue (Month): 2 ()
    Pages: 171-174

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    Handle: RePEc:wly:hlthec:v:8:y:1999:i:2:p:171-174
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    1. Weinstein, Milton & Zeckhauser, Richard, 1973. "Critical ratios and efficient allocation," Journal of Public Economics, Elsevier, vol. 2(2), pages 147-157, April.
    2. 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.
    3. 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.
    4. 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.
    5. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
    6. 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.
    7. David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc.
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