Why Use Cost-Effectiveness Analysis?
The 1993 edition of Disease Control Priorities in Developing Countries(Jamison and others 1993) was among the first efforts to guide choices about public health policies in developing countries by systematically combining information about effective interventions with information about their costs. It was motivated, in part, by a sense that developing countries were neglecting numerous opportunities for improving health and that better allocation of scarce resources could achieve better health outcomes. The publication presented cost-effectiveness analysis as an important tool for identifying these neglected opportunities and redirecting resources to better use.
Cost-effectiveness analysis helps identify neglected opportunities by highlighting interventions that are relatively inexpensive, yet have the potential to reduce the disease burden substantially. For example, each year more than a million young children die from dehydration when they become ill with diarrhea. Oral rehydration therapy (ORT) does not diminish the incidence of diarrhea, but dramatically reduces its severity and the associated mortality rate. The scientific evidence that ORT can save lives was an important step in identifying this as a neglected opportunity for improving health. Demonstrating that it could cost only US$2 to US$4 per life year saved helped make the case that this was something public policy should promote, and many countries responded by promoting ORT, saving millions of lives (DCP2, chapters 8 and 19).
". . . in the United States . . . the number of life years saved could be doubled if resources were reallocated to more cost-effective interventions . . ."
Cost-effectiveness analysis helps identify ways to redirect resources to achieve more. It demonstrates not only the utility of allocating resources from ineffective to effective interventions, but also the utility of allocating resources from less to more cost-effective interventions. For example, a study by the National Center for Policy Analysis at Harvard University focused on 185 life-saving interventions that take place in the United States each year, costing US$21.4 billion and saving 592,000 life years. The study investigated different ways of allocating these funds and found that the number of life years saved could be doubled if resources were reallocated to more cost-effective interventions (DCP2, chapter 2, box 3).
DCP2 tells a similar story. It identifies dozens of interventions for a wide range of diseases and risk factors that are costly relative to the health gain they provide. These include hospital-based interventions, such as surgery for recurrent stroke, and community-based interventions for schizophrenia and bipolar disorder. Other interventions that are not particularly cost-effective include treating latent TB infections with isoniazid and regulations aimed at reducing alcohol abuse. If a country were to reallocate funds and efforts from these kinds of interventions and instead apply them to relatively more cost-effective interventions, substantially more people would be able to live longer and healthier lives. If reallocating funds from less cost-effective interventions is not feasible or appropriate, perhaps future increases in spending can be directed toward activities that will yield more health gains.
". . . interventions . . . that are costly relative to the health gain they provide. . . . include . . . surgery for recurrent stroke, and community-based interventions for schizophrenia and bipolar disorder."
Studies of cost-effectiveness have multiplied since 1993, and the techniques have become more widely disseminated. DCP2 has benefited from this expanding literature and has aimed for consistent comparisons across diseases and interventions. For example, wherever possible, the cost-effectiveness analyses in DCP2 have used the same price units, health indicators, and definitions of included costs (box 3.1). This chapter introduces the basic concepts and methods of cost-effectiveness analysis, considers some of its limitations, and explains how it has been and can be put to use. The chapter also considers some of the other contextual factors that must complement cost-effectiveness analysis in the decision-making process if policy makers are to make the best use of the findings provided in DCP2.
[Box 3.1]
