chapter 2 cost and evaluation

1. lecture; yaxye
presentation; cost effectiveness analysis
group ; three(3)

2. GROUP MEMPER
 Craxamaan maxamed cali
 Hoodo cali
 Naziim csalaan
 Zaki claahi axmed

3. cost-
effectiveness
analysis

4. CONTENTS
 Definition Cost-effectiveness analysis (CEA)
 Purpose of cost effectiveness analysis
 How is CEA different from Cost-Benefit Analysis?
 When and why is CEA useful
 constitutes a cost
 How to use cost effectiveness analysis
 CEA APPLLICATIONS
 References

5. COST-EFFECTIVENESS ANALYSIS (CEA)
 is a form of economic analysis that compares the
relative costs and outcomes (effects) of different
courses of action. Cost-effectiveness analysis is
distinct from cost–benefit analysis, which assigns a
monetary value to the measure of effect.
 Cost-effectiveness analysis is often used in the
field of health services, where it may be
inappropriate to monetize health effect.

6.  Cost-effectiveness analysis
has been defined by the National Institute
for Health and Clinical Excellence (NICE)
as an economic study design in which
consequences of different interventions
are measured using a single outcome,
usually in ‘natural’ units (for example,
life-years gained, deaths avoided, heart
attacks avoided or cases detected).

7. PURPOSE OF COST EFFECTIVENESS ANALYSIS
 To identify exclude programe that is wasting
resources.
 To provide general information on the relative costs
and health benefits of different alternatives.
 To evalute the interventions in terms of efficacy
(cost effective ratio) absolute health gain and
affordability (absolute cost).

8. HOW IS CEA DIFFERENT FROM COST-
BENEFIT ANALYSIS?
 Outcomes
 • CBA: Ratio of costs of program to all identified
outcomes (benefits)
 • CEA: Ratio of costs of program to one defined
outcome (benefit)
 EXAMPLE: • Ratio of cost of education program
as a ratio to its impact on learning, physical and
mental health, household bargaining power, future
labour market outcomes, intergenerational well-
being
 • Ratio of cost of education program as a ratio to its
impact on learning

9. WHEN AND WHY IS CEA USEFUL?
 Good option when there is one key specific
outcome of interest, which is often the case in
policy
 • CBA requires quantifying outcomes that are
difficult to quantify (controversial)
 CEA can allows comparison of multiple programs
by comparing impact in terms of one outcome
across schemes
 • Helps with decision making, particularly under
a fixed budget (i.e., which will give the most impact
for the least cost?)

10. WHAT CONSTITUTES A COST?
 Costs are seen differently from different
points of view. In economics the notion of
cost is based on the value that would be
gained from using resources elsewhere –
referred to as the opportunity cost.

11.  In cost-effectiveness analysis it is
conventional to distinguish between the
direct costs and indirect or productivity
costs associated with the intervention, as well
as what are termed intangibles, which,
although they may be difficult to quantify, are
often consequences of the intervention and
should be included in the cost profile.

12. ● Direct costs: Medical: drugs; staff time;
equipment. Patient: transport; out-of pocket
expenses.
● Productivity costs: production losses;
other uses of time.
● Intangibles: pain; suffering; adverse
effects.

13. HOW TO USE COST EFFECTIVENESS ANALYSIS
 A distinction must be made between those
interventions that are completely
independent – that is, where the costs and
effects of one intervention are not affected by
the introduction or otherwise of other
interventions – and those that are mutually
exclusive – that is, where implementing one
intervention means that another cannot be
implemented, or where the implementation
of one intervention results in changes to the
costs and effects of another.

14. INDEPENDENT PROGRAMMES
 Using cost-effectiveness analysis with
independent programmes requires that
costeffectiveness ratios (CERs) are calculated
for each programme and placed in rank order:
CER = Costs of intervention
Health effects produced
(eg life-years gained)

15. Programm
e
Costs (£)
[C]
Effects
(life-years
gained)
[E]
Increment
al cost
[∆C]
Increment
al effect
[∆E]
ICER
[∆C/∆E]
P1 125,000 1,300 125,000 1,300 96.15
P2 100,000 1,500 –25,000 200 –125
P3 160,000 2,000 60,000 500 120
P4 140,000 2,200 –20,000 200 –100
P5 170,000 2,600 30,000 400 75
Incremental cost-effectiveness ratios
Mutually exclusive interventions

16.  The alternative interventions are ranked
according to their effectiveness – on the basis
of securing maximum effect rather than
considering cost – and ICERs are calculated as
shown in Table 3.
The least effective intervention (P1) has
the same average CER as its ICER, because it is
compared with the alternative of ‘doing
nothing’.

17.  ICER for P2 =
Cost of P2 – Cost of P1
Effect of P2 – Effect of P1
= 100,000 – 125,000
1,500 – 1,300
= –25,000
200
= –125

18.  The negative ICER for P2 means that by
adopting P2 rather than P1 there is an
improvement in life-years gained and a
reduction in costs. The ICER for P3 works out
to be 120, which means that it costs £120 to
generate each additional life-year gained
compared with P2.
Alternatives that are more expensive and

21. CEA APPLLICATIONS
 Planning and management .
 Policy and decision making.
 Resource allocation.
 In health services; when it’s inappropriate to
monetize health effect..
 Used in different study designs .
 Not the only criteria for decision making.

22. REFERENCES
 Tengs TO, Adams ME, Pliskin JS, et al. (June 1995).
"Five-hundred life-saving interventions and their cost-
effectiveness". Risk Anal. 15 (3): 369–
90. doi:10.1111/j.1539-
6924.1995.tb00330.x. PMID 7604170.
 Jump up^ Bell CM, Urbach DR, Ray JG, et al. (March
2006). "Bias in published cost effectiveness studies:
systematic review". BMJ. 332 (7543): 699–
703. doi:10.1136/bmj.38737.607558.80. PMC 1410902 .
PMID 16495332.
 Jump up^ Pekka Tuominen, Francesco Reda, Waled
Dawoud, Bahaa Elboshy, Ghada Elshafei, Abdelazim
Negm: Economic Appraisal of Energy Efficiency in
Buildings Using Cost-effectiveness Assessment.
Procedia Economics and Finance, Volume 21, 2015,
Pages

23. thanks