Advances in Cost-Effectiveness Analysis of Health Interventions

53 Pages Posted: 31 Aug 1999 Last revised: 13 Oct 2010

See all articles by Alan M. Garber

Alan M. Garber

Stanford University - Center for Primary Care and Outcomes Research; Government of the United States of America - Palo Alto Veterans Affairs Medical Center; National Bureau of Economic Research (NBER)

Date Written: June 1999

Abstract

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.

Suggested Citation

Garber, Alan M., Advances in Cost-Effectiveness Analysis of Health Interventions (June 1999). NBER Working Paper No. w7198. Available at SSRN: https://ssrn.com/abstract=170771

Alan M. Garber (Contact Author)

Stanford University - Center for Primary Care and Outcomes Research ( email )

179 Encina Commons
Stanford, CA 94305-6019
United States
650-723-0920 (Phone)
650-724-5182 (Fax)

Government of the United States of America - Palo Alto Veterans Affairs Medical Center

Palo Alto, CA 94304
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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