Economic Evaluations,
Briefly…
CHSC 433
Module 6/Chapter 13
UIC School of Public Health
L. Michele Issel, PhD, RN
Objectives

To understand the conceptual basis of economic
evaluations

Be able to distinguish among the types of
economic evaluations

Be confident as a participant in a team that
undertakes an economic evaluation

NOT: be fully competent to do on own!
Be a critical consumer
Not all publications and reports
are what they seem or do what
they are titled. Be a savvy
consumer of economic
evaluations…
Types of
Economic Evaluations

Cost Description

Cost Analysis

Cost-Effectiveness

Cost-Benefit
Cost-Utility
 Note: These are not mutually exclusive, nor
the only way to typify economic evaluations.

Which
Economic Evaluation to Do?
To formulate the economic evaluation
question decide whether:
 Are 2 or more programs being
compared?
 Are cost only, or costs and impact
being considered?
Types of Economic Evaluations
(Drummond et al, 1997)
Looks at: Impact only Costs
only
Impact and
costs
One
program
Outcome
description
Cost
description
Cost-impact
description
2 or more
programs
Efficacy or
effectiveness
evaluation
Cost
analysis
Cost-effectiveness
Cost-benefit
Cost-utility
Similarity of process

The steps are basically the same

Note: The alternative program can be
either the do-nothing option or the
“standard treatment”
Terminology to know
Opportunity Costs
Externalities
Discounting
Inflation
Depreciation
Sensitivity analysis
Steps in Cost & Effect
Evaluations

Define program
• Target population, Interventions to be
evaluated, Program goals and objectives

Identify the alternatives to be compared

Develop decision rules
• assumptions, definitions
Steps

(Continued)
Compute costs related to the program(s)
• Resources utilized by program and by
participants
• Productivity loss/gain of participants, family
burden, etc
• Adjust for time through discounting,
inflation, depreciation
Steps
(continued)

Identify and measure program impacts
or outcomes

Compute costs of effects

Conduct sensitivity analysis

Disseminate findings
Major Types of Cost Analyses
 Cost
Effectiveness
 Cost Benefit
 Cost Utility
Cost-Effectiveness Analysis
(CEA)
Asks: Does Program A have more effect for
the dollars expended than does Program
B?
Findings: Specific comparison between
programs
C/E ratio is the incremental price to get one unit
of effect compared to the alternative
CEA
Effects of the programs are measured in
natural or physical units of health effects that
are common to both programs
QALYs, DALYs, HLYs can be used
Amount of cost per amount of effect for each
program
Low C/E ratio is a good buy
Formula for CEA Ratio
Basically ~
Numerator of Cost $
Denominator of Health Effect Unit
Cost = health care resources + non-health care
resources + informal caregiving + participant
time
Cost-Benefit Analysis
(CBA)
Asks: Are benefits gained worthwhile to society,
given the costs?
Findings: Broad, policy implications because of
societal focus
Grounded in welfare economics
CBA
Benefits (impacts) measured in market
value, willingness to pay (WTP), life
expectancy. Measures ALL outcomes.
Value in dollars is used to compare
programs. Often compare to the donothing option.
Formula for CBA Ratio
Basically ~
Numerator of Cost $
Denominator of Benefit $
Benefit $= participant productivity + gain in
taxes + reduction in health expenses + etc...
Cost-Utility Analysis (CUA)
Asks: How much is it worth to have a
particular state of health?
Findings: Reflect importance; difficult to
use for planning or policy because of
idiosyncratic nature of preferences.
CUA
Measures Used: Utility measures, weighted
utility measures.
Utility refers to a preference for a state of
health, which is achieved as an impact
from the program.
Utility Determination
Example~
Would you rather have sever, chronic
hypertension or Type II diabetes?
Would you rather loose right leg or left
hand?
Would you rather loose you left hand or
have Type II diabetes
Formula for CUA Ratio
Basically ~
Numerator of Cost $
Denominator of Utility Units
Criteria for Assessing Published
Economic Evaluations
(Drummond et al 1997; Gold et al 1996)
FRAMEWORK:

Well defined economic question

Description of alternative programs

Effectiveness of intervention(s)
established
Criteria (continued)
DATA and METHODS:
 Costs and consequences/impact identified for
alternative programs
 Appropriateness of units of measure
 Credible values for costs and
consequences/impacts
 Cost adjustments for timing (discounting, etc)
 State year and type of currency
 Software used
Criteria
(continued)
RESULTS:
 Sensitivity analysis conducted
 Graphical presentation of C/E results
 Any secondary analyses
DISCUSSION:
 Limitations of the study
 Policy implications
 Intervention implications
Decision Balance
Economic Evaluations
Across the Pyramid
Note:
Possible at each
level
Precision in cost
estimation
decreases as
move down the
pyramid
Direct
Health Care
Services
____________________
Enabling Services
___________________________
Population-Based Services
___________________________________
Infrastructure Services