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Advances in Cost-Effectiveness Analysis of Health Interventions

  • Alan M. Garber
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    The growing application of cost-effectiveness (CE) analysis and controversies about its methods has led to a need to explore its welfare economic foundations. Examination of its welfare theoretic foundations can provide a rationale for selecting specific standards for the application of CE analysis while deepening our understanding of the implications of alternative methodological approaches. In this paper, I explore conditions under which decision making based on CE analysis, carried out a specific way, leads to a distribution of resources that has desirable social welfare properties. The first section describes the basics of CE analysis and how it can be applied to aid decisions about the allocation of health resources. The paper then turns to the potential welfare economic foundations of CE analysis, and addresses specific issues in carrying out CE analysis, such as which costs to include, whose perspective matters in the analysis, and how health outcomes are measured. It demonstrates how a welfare economic foundation can help resolve ambiguities and uncertainties about the application of CE analysis. The paper also discusses the limitations of such an approach, which indeed reflect limitations of CE analysis as an analytic framework. Finally, it addresses unresolved issues such as the difficulties in using the results of CE analysis to make health policy at the societal or group level.

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    File URL: http://www.nber.org/papers/w7198.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7198.

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    Date of creation: Jun 1999
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    Publication status: published as Garber, Alan M., 2000. "Advances in cost-effectiveness analysis of health interventions," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 4, pages 181-221 Elsevier.
    Handle: RePEc:nbr:nberwo:7198
    Note: HC
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. 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.
    2. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
    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. Garber, Alan M. & Phelps, Charles E., 1997. "Economic foundations of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 1-31, February.
    5. Gafni, Amiram & Birch, Stephen, 1997. "QALYs and HYEs Spotting the differences," Journal of Health Economics, Elsevier, vol. 16(5), pages 601-608, October.
    6. Kenkel, Don, 1997. "On valuing morbidity, cost-effectiveness analysis, and being rude," Journal of Health Economics, Elsevier, vol. 16(6), pages 749-757, December.
    7. repec:cup:cbooks:9780521438834 is not listed on IDEAS
    8. Birch, Stephen & Gafni, Amiram, 1994. "Cost-effectiveness ratios: in a league of their own," Health Policy, Elsevier, vol. 28(2), pages 133-141, May.
    9. 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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