Economic Evaluation for Health Priority-Setting: Cost-Effectiveness Analysis and Benefit-Cost Analysis Primer

Abstract

Economic evaluation is a powerful tool, encouraging the systematic collection and assessment of the evidence needed to support sound policy decisions. In low- and middle-income countries, where resources are especially scarce and needs are very great, such decisions are exceptionally difficult. In these settings, economic evaluation can be particularly useful in determining how to best improve health and welfare. Typically, cost-effectiveness analysis (CEA) is used to prioritize interventions within the health care sector. This approach involves comparing monetary costs to non-monetary measures of health impacts, focusing on how to best invest limited resources to maximize improvements in health. Outside the health care sector, benefit-cost analysis (BCA) is more often used. Under this approach, all impacts, including health, are valued in monetary terms. The focus is on investing to improve welfare more generally, including health and other aspects of wellbeing. Both approaches provide important and useful information, although each has limitations as well as advantages. This working paper introduces and summarizes these economic evaluation methods.

Note:

Funding Information: Core funding is provided by the Norwegian Agency for Development Cooperation and the Norwegian Research Council.

Conflict of Interests: The authors declare they have no competing interests.

Keywords: benefit-cost analysis, cost-effectiveness analysis, public health

JEL Classification: D61, H43, H51, I18, Q50