Cost-Effectiveness Analysis

CEA Basics - What's the Deal?

• What: Compares costs (money) vs. health outcomes (natural units: LYG, cases averted) of interventions.
• Goal: Best value - max health per cost, or target health at min cost.
• Outcomes: Natural units (LYG, lives saved), not money.
• Core Metric: Incremental Cost-Effectiveness Ratio (ICER).
  • $ICER = \frac{\Delta C}{\Delta E}$
• Key Distinctions:
  • vs. CMA: Outcomes differ (CMA: equal).
  • vs. CBA: Health units, not money (CBA: money).
  • CUA: Subtype using QALYs/DALYs.

⭐ CEA focuses on allocative efficiency: choosing interventions that maximize health outcomes from a limited budget.

CEA Metrics - Number Crunching

• Costs in CEA:
  • Direct Costs: Medical (drugs, consultations, fees), Non-medical (patient travel, special food).
  • Indirect Costs: Productivity losses (absenteeism from work, premature mortality).
  • Intangible Costs: Pain, suffering, anxiety (difficult to value monetarily).
• Outcome Measures:
  • QALY (Quality-Adjusted Life Year): $1 \text{ QALY} = 1 \text{ year of life in perfect health}$. Measures health gain.
  • DALY (Disability-Adjusted Life Year): $DALY = YLL + YLD$. Measures overall disease burden.
    • YLL: Years of Life Lost (due to premature mortality).
    • YLD: Years Lived with Disability (adjusted for severity & duration).
• ICER (Incremental Cost-Effectiveness Ratio):
  • Formula: $ICER = \frac{(\text{Cost}\text{new} - \text{Cost}\text{std})}{(\text{Effect}\text{new} - \text{Effect}\text{std})}$ (or $\frac{\Delta C}{\Delta E}$)
  • Compares extra cost for extra health gain of a new intervention vs. standard/comparator.
  • Units: e.g., Cost per QALY gained, Cost per DALY averted.

⭐ ICER helps determine if an intervention's additional cost is justified by its additional health benefit, guiding resource allocation decisions.

CEA Steps - The How-To Guide

• 1. Define Problem & Perspective: State health question, population, viewpoint (e.g., societal, payer).
• 2. Identify Alternatives: List interventions/programs for comparison (e.g., new vs. standard).
• 3. Identify & Measure Costs: Quantify resources: direct medical/non-medical, indirect costs (e.g., productivity).
• 4. Identify & Measure Outcomes: Assess effects: natural units (e.g., LYG, cases averted) or QALYs.
• 5. Calculate ICER: $ICER = \frac{\Delta \text{Cost}}{\Delta \text{Effect}}$.
• 6. Conduct Sensitivity Analysis: Evaluate impact of uncertainty in estimates on ICER.
• 7. Interpret & Recommend: Compare ICER to cost-effectiveness threshold for decisions.

⭐ The perspective of a CEA (e.g., patient, provider, societal) significantly influences which costs and benefits are included, thereby affecting the results.

Interpreting & Applying CEA - Decision Time!

• Incremental Cost-Effectiveness Ratio (ICER): $ICER = \frac{\Delta C}{\Delta E} = \frac{C_1 - C_0}{E_1 - E_0}$. Compare to WTP.
• Cost-Effectiveness (CE) Plane: Visualizes interventions:
  • NE Quadrant (More effect, Less cost): Dominant → Accept.
  • SW Quadrant (Less effect, More cost): Dominated → Reject.
  • SE/NW Quadrants: Trade-offs, decision via ICER vs. WTP.
• Willingness-to-Pay (WTP) Threshold: Max society pays for health gain (e.g., per QALY/DALY averted).
  • ICER < WTP: Cost-effective.
  • ICER > WTP: Not cost-effective.

⭐ WHO: 1x GDP per capita = very cost-effective; 1-3x GDP per capita = cost-effective.

• Decision Rule: Prioritize interventions where ICER < WTP. Consider equity & budget impact.
• Sensitivity Analysis: Tests robustness of ICER to uncertainties.

High‑Yield Points - ⚡ Biggest Takeaways

• CEA compares interventions by costs (monetary) and health outcomes (natural units like LYG, QALYs).
• Key metric: ICER (Incremental Cost-Effectiveness Ratio) = ΔCost / ΔEffect.
• Dominant strategy: Cheaper and more effective; always preferred.
• Dominated strategy: More expensive and less effective; always rejected.
• Cost-Effectiveness Plane visually plots interventions against a comparator.
• Willingness-to-Pay (WTP) threshold helps decide if an ICER is acceptable.
• CEA aids in efficient resource allocation and health policy decisions.