COST-EFFECTIVENESS

Society confronts many difficult choices in the provision of health care services and public health programs. Many options exist for resolving these choices, though none without compromise. To make informed choices, we need information about the impact of services and programs, their costs, and the consequences of choosing one option over another. One tool for combining these three pieces of information is called cost-effectiveness analysis. The term "cost-effective" describes the dominating option in such an analysis. Thus, for a given cost, program A is cost-effective if its impact is greater than that of program B, all other factors being equal. Or for a given level of impact, program A is cost-effective if its cost is less than program B, all other factors being equal.

"Cost-effective" options may vary among groups in society because they assess costs or value life, improved health outcomes, or other consequences differently. The U.S. Congress, business leaders, managed care organizations, pharmaceutical industry, and the public may all view an analysis differently because they seek different societal objectives. The common meaning, however, is "value for money." Differences in how various groups view a particular program reflect how different alternatives or aspects of alternatives are valued.

Cost-effectiveness analysis is an analytical tool whose purpose is to provide information about the relative value of different approaches to eliminating disparities, increasing life expectancy, or any program or initiative. The imprecision associated with the term "cost-effective" comes in part from how cost-effectiveness analysis has evolved. This tool has been crafted by analysts from many different disciplines, including economics, medicine, public health, sociology, operations research, and ethics. Each discipline contributes a particular set of concepts and language, which have been melded together to build cost-effectiveness analysis.