This timely and informative review describes the components of a cost-effectiveness analysis and provides useful commentary on various ways to measure them. It may be helpful, however, to take a step back and compare cost-effectiveness analysis to the other basic approaches to economic analysis.
In all health economic analyses, the goal is to compare one treatment or strategy with another. The real question is not how much it costs to deliver a particular treatment, but how much more it costs to provide that treatment than the most reasonable alternative. Sometimes the alternative is a "no treatment" strategy, but this isn't the equivalent of a "no cost" strategy. For example, the real difference in direct medical costs between a strategy of giving adjuvant chemotherapy for a particular disease and a no treatment alternative is not limited to the cost of the chemotherapeutic agents, antiemetics, and nurse and physician time required to administer them. The cost of caring for the patients in subsequent years is also a component of the direct medical cost of each strategy. The additional or incremental cost of the adjuvant therapy strategy may actually be lower than the cost of the treatment itself if patients in the no treatment group experience poorer outcomes and consequently consume more medical resources in later years.
All economic analyses, then, examine the difference in cost between alternative strategies. They differ in how they measure the benefits resulting from those strategies. As shown in Table 1, the four basic types of economic analysis measure these benefits in four different ways. In a cost-minimization study, the two treatments are assumed to produce comparable benefits. The less expensive treatment is therefore the preferred one. But very few medical interventions produce truly equivalent outcomes. More commonly, the question is whether the additional benefit conferred by the more expensive treatment is sufficient to justify the additional cost.
A cost-benefit analysis addresses this question by assigning a dollar value to the health outcome. If the incremental benefit of one treatment over another, measured in monetary terms, is greater than or equal to the incremental cost, then the additional cost is considered justified. Cost-benefit analyses are used infrequently in evaluating health interventions because of the difficulty inherent in assigning a dollar value to a life saved and other health outcomes.
Cost-effectiveness analysis measures the benefit of a health-care intervention in units of medical effect. For example, the cost-effectiveness of a new chemotherapeutic agent in comparison with a cheaper alternative could be assessed by calculating the additional cost (in dollars) per each additional complete response. However, one of the goals of cost-effectiveness analysis is to guide decisions about whether expenditures for a particular intervention are justified compared with alternative uses of those limited resources, including treatments for other diseases. This judgment is facilitated if health benefits are measured in units that are common across diseases. Years of life saved is the most frequently used measure. Cost-effectiveness ratios are therefore usually expressed in units of dollars per year of life saved.
How does one judge what constitutes a reasonable number of dollars per year of life saved? Standards for this measure have been established by examining cost-effectiveness ratios for interventions that are generally regarded by society as reasonable and those that are generally regarded as inordinately expensive for the degree of benefit produced. The conclusion is that interventions costing under approximately $50,000 per year of life saved are cost-effective, and those costing over $100,000 are cost-ineffective. Cost-effectiveness ratios falling between these levels are in a gray zone.
Cost-utility analysis--But medical interventions are not directed exclusively at saving years of life. Much of the health-care dollar is spent on therapies that are given with palliative intent. Cost-utility analysis is a particular type of cost-effectiveness analysis that takes into account the impact of a health intervention on quality of life as well as length of life. As described by Schulman and Yabroff, this is done by measuring quality-adjusted survival in the form of quality-adjusted life-years (QALYs). The units of a cost-utility ratio are thus dollars per QALY. Of all the types of economic evaluation, cost-utility analyses assess health benefits in the most clinically meaningful way. They are appearing with increasing frequency in the clinical literature and may become the dominant mode of economic analysis as user-friendly methods of utility (preference) assessment become available.
Should the practicing clinician care about economic analyses of health care intervention? One could ask whether it is appropriate to publish economic analyses in the clinical literature at all. In the United States, though not necessarily in all developed countries, it is generally believed that the physician should function as the patient's advocate and in this role should offer any treatment likely to be of net benefit, regardless of the cost to society. But some clinicians serve other roles as well, as administrators and policy makers, jobs in which they need to consider whether the costs of various health-care services are justified by the benefits they produce. And all are citizens and tax payers. If physicians are to have a meaningful voice in the debate over the allocation of health- care dollars, they must understand the language in which the discussions are being held.