1. Cost & Benefit Analysis Studies 1.Cost Identification Analysis (or Cost of Illness Studies) –What’s economic burden of the illness? 2.Cost-Minimization Analysis –What’s cheapest way to ameliorate an illness? 3.Cost-Benefit Analysis –What’s optimal level of care? 4.Cost-Effectiveness (& variant Cost-Utility) Analysis –What’s cheapest way to achieve a particular improvement in health? (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 1

2. I. Cost Identification Analysis Cost identification studies –Measure the total cost of a given medical condition or type of health behavior on the overall economy Total cost - three major components: 1.Direct medical care costs 2.Direct nonmedical costs 3.Indirect costs (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 2

3. Cost Identification Analysis Direct medical care costs –Incurred by medical care providers Hospitals, physicians, and nursing homes –All necessary medical tests and examinations –Administering medical care –Any follow-up treatments Direct nonmedical costs –All monetary costs imposed on any nonmedical care personnel, including patients Transportation to and from the medical care provider Home care; specific dietary restrictions (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 3

4. Cost Identification Analysis Indirect costs –Time costs associated with implementation of the treatment –Opportunity cost of the patient’s (or anyone else’s) time that the program affects Lost productivity (& wages) to economy (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 4

5. Cost Identification Analysis Behan & Cox (2011) –Total Cost of Obesity in US & Canada in 2009 $300 Billion – $128 Billion in Medical Costs – $172 Billion in costs from excess disability and mortality Sobocki et al. (2006) –Cost of depression in Europe 118 billion euros (Direct costs = 42 billion euros) (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 5

6. Cost Identification Analysis Dall et al (2010) –Direct and indirect costs of diabetes in 2007 $218billion –$153 billion direct medical costs –$65 billion indirect expenses such as lost work days and permanent disability The American Heart Association –Cost of cardiovascular disease and stroke $448.5 billion in 2008 (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 6

7. II. Cost-Minimization Analysis Identifies which alternative treatment has the lowest cost –Is laparoscopic hysterectomy less costly than standard surgery –Is kidney transplant less costly than dialysis for end stage renal disease –Is repositioning and mobilization less costly than special dressings and ointments for treating pressure ulcers in hospital (8% patients get them still) (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 7

8. Cost Minimimization Analysis Coast et.al. (1998) –Cost of hospital in the home care in UK was 25% less than full hospital care Loubeau, Loubeau & Jantzen (2001 –Breakeven point for kidney transplant vs. dialysis is 39 months. (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 8

9. III. Cost-Benefit Analysis Objective #1: Assess whether the Total Benefits of health care activity are greater than the Total Costs Objective #2: Assess whether the Total Benefit/Total Cost ratio for differing types of care are equal Objective #3: find the level of health care activity that maximizes net benefits to society (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 9

10. Cost-Benefit Analysis Similar decision making process as finding the level of production that maximizes net profit to a business TNSB = TSB – TSC –TSB - total social benefit in consumption Money value of the satisfaction generated from consuming the god or service –TSC - total social cost of production Money value of all the resources used in producing the good or service (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 10

11. Cost-Benefit Analysis TNSB from medical services TNSB(Q) = TSB(Q) - TSC(Q) –Q – quantity of medical services Maximize TNSB(Q) –Choose Q at which the difference between TSB and TSC reaches its greatest level (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 11

12. FIGURE 3–1 Determination of the Efficient Level of Output (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 12 The TSB curve represents the monetary value of the total social benefit generated from consuming medical care. The curve is positively sloped to reflect the added monetary benefits that come about by consuming more medical care. The curve bows downward to capture the fact that society experiences diminishing marginal benefit with regard to medical care. Quantity of medical services (Q) TSB Q0Q0 TNSB is maximized when the vertical distance between the two curves is greatest and that occurs at Q 0 level of medical services. A The TSC curve represents the TSC of producing medical care and is upward sloping because total costs increase as more medical care is produced. The curve bows toward the vertical axis because the marginal cost of producing medical care increases as more medical care is produced. TSC B Costs and benefits of medical services 0

13. Cost-Benefit Analysis TSB - increase at a decreasing rate –Diminishing marginal benefit Successive incremental units of medical services generate continually lower additions to social satisfaction –Slope: MSB(Q) = ΔTSB/ΔQ MSB - marginal social benefit from consuming a unit of medical services MSB decreases with quantity since the slope of the TSB curve declines due to diminishing marginal benefit (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 13

14. Cost-Benefit Analysis TSC - increase at an increasing rate –Increasing marginal costs of producing medical services. –Slope: MSC(Q) = ΔTSC/ΔQ MSC - marginal social cost of producing a unit of medical services MSC increases with output as the slope of the TSC curve gets steeper due to increasing marginal cost (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 14

15. Cost-Benefit Analysis Maximize TNSB –Slope of TSB = slope of TSC –MSB(Q) = MSC(Q) –At output level Q 0 Allocative efficiency - best quantity of medical services (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 15

16. Cost-Benefit Analysis MSB curve - negatively sloped –Diminishing marginal benefit MSC curve - positively sloped –Increasing marginal costs, respectively Efficient amount of medical services: Q 0 –Where MSB = MSC (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 16

17. FIGURE 3–2 Under- and Overprovision of Medical Services (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 17 Quantity of medical services (Q) Q0Q0 Costs and benefits of medical services If Q L amount of medical care is produced, then the MSB exceeds the MSC and society would be better off if more medical services were produced. If Q R amount of medical care is produced, then the MSB is less than the MSC and too much medical care is produced. MSB A MSC B C QRQR QLQL G F E H The MSB curve stands for the marginal social benefit generated from consuming medical care and is downward sloping because of the notion of diminishing marginal benefit. The MSC curve stands for the marginal social cost of producing medical care and is upward sloping because of increasing marginal costs. TNSB is maximized at Q 0 level of medical care where the two curves intersect. At that point, the MSB of consuming medical care equals the MSC of production.

18. Cost-Benefit Analysis TNSB –Area below MSB curve but above MSC curve Sum of net marginal social benefits –Area ABC = maximum TNSB that society receives if resources are allocated efficiently (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 18

19. Cost-Benefit Analysis For Q L MSC –Too few medical services are being produced –Deadweight loss: ECF Lost amount of net social benefits Cost associated with an underallocation of resources to medical services (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 19

20. Cost-Benefit Analysis For Q R > Q 0 : MSC > MSB –Too many medical services are being produced –Deadweight loss GCH Net cost to society from producing too many units of medical services and therefore too few units of all other goods and services. (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 20

21. Cost-Benefit Analysis NMSB(Q) = MSB(Q) - MSC(Q) –NMSB - net marginal social benefit the society derives from consuming a unit of the good If NMSB > 0 –Total net social benefit increases if an additional unit of the good is consumed If NMSB < 0 –Society is made worse off if an additional unit of the good is produced and consumed (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 21

22. Cost Benefit Number Example No. ofTotalMarginalDecline inTotalMarginalNet Flu ShotsCosts IllnessesBenefits 040K---00 0 100060K201500150K15090K 200080K203000300K150220K 3000100K203600360K60260K 4000120K203900390K30270K 5000140K204000400K10260K Note: assume each illness prevented generates $100 in extra benefits (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 22

23. Steps for Cost/Benefit Analysis Must identify two relations –Health Production Function, i.e., how does medical care influence health Benefits from improvement in health must be “monetized” to dollar benefits More years worked, less suffering, less future health care spending –Medical Care Production Function, i.e., what are the costs of differing levels of care (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 23

24. Practical Issues of Using Cost-Benefit Analysis What are the opportunity costs of medical care? Benefits in future must be discounted to today’s $ Quality differences in health inputs/outputs are difficult to measure & compensate for How to place a dollar value on better health, e.g., value of saved life, less pain & suffering (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 24

25. Human capital approach Many medical interventions –Extend or improve the quality of life Human capital approach –Value of a life = the market value of the output produced by an individual during his or her expected lifetime –Estimate the discounted value of future earnings resulting from an improvement in or an extension of life (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 25

26. FIGURE 3–3 Present value of lifetime earnings, males & females, 2000 (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 26

27. Human capital approach Present value of lifetime earnings –Initially increases with age Value of lifetime earnings that accrue mainly in the middle adult years are discounted over a shorter period of time –Peak - between the ages of 20 and 24 –Then decreases with age Productivity and number of years devoted to work decrease –Sensitive to the discount rate (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 27

28. Human capital approach Shortcomings –Unable to control for labor market imperfections Gender, racial, other forms of discrimination –Doesn’t take into account Value of any pain and suffering averted because of a medical treatment Value an individual receives from the pleasure of life itself –A chronically unemployed person Has a zero or near-zero value of life (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 28

29. Willingness-to-pay approach –How much money people are willing to pay for reductions in the probability of dying, injury Labor market wage differences – how much extra do dangerous jobs have to pay to induce workers to risk their lives? Consumer safety purchases – how much do people spend to avert deaths and avert injury Survey data – how much do people say they would pay to avoid death or injury (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 29

30. Willingness to Pay Evidence –From wage differences, value of life saved =.6 mil to 16.2 mil. –From consumer purchases, value of life saved =.07 mil. to 4 mil. (smoke detector spending, auto safety devices) –From surveys, value of life saved = 1 mil to 15.6 mil. Although wide range, upper bound is around $16 million or so per life saved (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 30

31. Value of Saved Life Basis($1000s) Desire for prompt coronary care66 Auto air bag purchases360 Smoke detector purchases370 EPA sulfur scrubbers500 Seat belt use540 Law enforcement850 EPA water radium regs2500 Dangerous factory wages3200 OSHA safety rules3500 Premium tire purchases3600 Airline safety rules11800 (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 31

32. Willingness-to-pay approach π ˣ V = C V = C / π –Value of the human life lower-bound estimate Advantage –Measures the total value of life and not just the job market value (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 32

33. Should College Students Be Vaccinated? Meningococcal disease Jackson et al. (1995) –Cost-benefit analysis – policy to vaccinate all college students –Benefits - from a decrease in the number of cases of meningococcal disease –Cost of implementing a vaccination program for all college students (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 33

34. Should College Students Be Vaccinated? Costs –Cost of the vaccine ($30) multiplied by the number of doses needed 2.3 million freshmen 80% receive the vaccine –Estimated cost of any side effects One severe reaction per 100,000 students vaccinated ($1,830 per case) –$56.2 million a year (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 34

35. Should College Students Be Vaccinated? Benefits include –Medical costs diverted Treatment costs per case = $8,145 Costs for cases occurring in the 2nd, 3rd, and 4th years of college - discounted at 4% $3.1 million at 15 times the baseline rate –Estimated value of lives saved Human capital approach - value of lost earnings Each life saved =$1 million (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 35

36. TABLE 3–1 Estimated Benefits and Costs for the Vaccination of College Students against Meningococcal Disease (in millions of $) (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 36 Incidence would double w/o vaccine Incidence would be 15X w/o vaccine Cost of the Vaccination Program Total Benefits Direct Medical Benefits Indirect Benefits—Value of Lives Saved Net Benefits—(Benefits – Cost) $56.2 9.3 0.5 8.8 -46.9 $56.2 63.8 3.1 60.7 7.6

37. Should College Students Be Vaccinated? Estimated costs, baseline times 2 –Outweigh the benefits by more than $46 million Net benefits, baseline times 15 –$7.6 million. Estimated possible rate: 2.6 times –Costs outweigh the benefits (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 37

38. Should school kids (5-18) be vaccinated for flu? (Jordana. S. et al. 2008) Costs per household = $36 –Acquisition, Administration and Adverse events Benefits per household = $208 –Direct – outpatient, hospitalization, Rx, OTC $105 –Indirect – productivity loss, time costs due to illness $103 Net Benefits per household = $172 Benefits/Costs per household = $208/36 = 5.8 (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 38

39. Costs and Benefits of New Medical Technologies Advances in medical technology –Driving force behind rising medical costs –Profound effect on health and well-being of millions of people Overall mortality & disability rates in the United States have fallen consistently since World War II. (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 39

40. Costs and Benefits of New Medical Technologies Impact of medical technology on health –Total product curve for medical care Relationship between health and amount of medical care consumed –New medical technology - improves health Total product curve - rotates upward Each unit of medical care consumed now has a greater impact on overall health (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 40

41. Costs and Benefits of New Medical Technologies Cutler and McClellan (2001) –Benefits outweigh the costs –Heart attack 1984 – 1998: increase life expectancy by 1 year Net benefit: $60.000; Payoff 7 to 1 –Low-birthweight infants Net benefits = $200,000 per infant; Payoff 6 to 1 –Depression –Cataracts –Breast cancer (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 41

42. Cost-Effectiveness Analysis Cost-effectiveness analysis CEA –Health care benefits are often long-term and intangible, making them difficult to monetize. –CEA doesn’t try to monetize benefits –Typically it shows the marginal cost of producing a life year saved or the marginal cost of averting a death for differing treatments –Basically a Marginal Cost/Marginal Benefit calculation (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 42

43. Cost Effectiveness Study Findings Medicaid mandate (1990) that all states provide prenatal care to <133% poverty women –insured increased from 12% (1979) to 43% (1992) –Medicaid cost/client increased $224 –Infant mortality decreased from 11.5 to 8.5% –Marginal cost per life save = $840K –Pretty cheap (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 43

44. Joyce et al explain 75% decrease in neonatal mortality (1950 – 1996) as due to –Increased teen family planning (.6 lives per 1000 participants) –Increased neonatal ICUs (2.8 lives per 1000 participants) –Increased prenatal care (4.5 lives per 1000 participants) –Cost for each 1000 extra participants are 122K, 13.6 mil. and 176K –MC/MB (cost per life saved) are 203K, 4.8 mil. and 39K, respectively. Prenatal care cheapest! (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 44

45. Other estimates –Annual Spiral CT scanning costs 116K per life year saved for heavy smokers & 2.3 mil. For ex-smokers (vs. traditional chest x-rays) –Simvastatin to person diagnosed with heart disease costs 5-10K per LYS –Cost effectiveness of annual breast cancer screening (mammogram) Age 50-69, cost per year of life saved = $21,400 Age 40-49, incremental cost-effectiveness ratio = $105,000 per life-year saved (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 45

47. Cost-Utility Analysis (CUA) Critics of CEA: life-years are not always the same for differing treatments –Some care leads to many life-years but poor quality of life –Other care leads to few life-years but greatly enhanced quality of life –Cost-utility analysis (CUA) estimates the benefit side in terms of life-years saved adjusted for quality of well-being –1 = perfect health and 0 = death (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 47

48. Calculates the marginal cost per quality adjusted life year (or life saved) –Calculated rank for all medical services –MCQALYS = Marginal Cost/Marginal Benefit/QWB where Benefit is LYS after treatment and QWB ranges from 0 to 1 –E.G. Jogging from 30-60 prevents 78.1 coronary heart disease events and produces 1138 QALYS (adjusted by QWB =.8) yielding MCQALYS of $11300 –Treating mild angina = MCQALYS of $40K –Treating hypertension = MCQALYS of $25-65K (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 48

49. Calculates the marginal cost per quality adjusted life year (or life saved) –Calculated rank for all medical services –MCQALYS = Marginal Cost/Marginal Benefit/QWB where Benefit is LYS after treatment and QWB ranges from 0 to 1 –E.G. Jogging from 30-60 prevents 78.1 coronary heart disease events and produces 1138 QALYS (adjusted by QWB =.8) yielding MCQALYS of $11300 –Treating mild angina = MCQALYS of $40K –Treating hypertension = MCQALYS of $25-65K (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 49

50. Cost-Utility Analysis Neumann et al. (2000) –Effectiveness of prescription drugs Mean ratio of $11,000 per quality-adjusted life-year –Immunization - $2,000 per QALY –Medical procedures - $140,000 per QALY. –Surgery - $10,000 per QALY –Screening at $12,000 per QALY Stone et al. (2000) –Effectiveness of clinical preventive services Median cost utility ratio = $14,000 per QALY (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 50

51. Cost-Utility Analysis Digital vs. film mammography –Digital - superior in its ability to detect cancer for certain subpopulations Far more expensive –Tosteson et al. (2008) Replacement of all-film mammography screening with all-digital = cost $331,000 per QALY gained Targeted-digital mammography screening –Women 50 and younger - $26,500 per QALY –Women 50 and younger plus women older than 50 with dense breasts - $84,500 per QALY (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 51

52. TABLE 3–2 An Example of Cost Effectiveness and Cost-Utility Analysis (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 52 Treatment optionCostLife-years gainedHealth-utility indexQALY Current procedure New procedure $20,000 $110,000 2 years 8 years 0.7 0.4 1.4 3.2

54. Autologous Blood Donations Are They Cost Effective? Autologous blood donation –Donor and recipient are the same person Allogeneic blood donation –Donor and recipient are different people Autologous blood donation –Safer –More costly More administrative and collection expenses Higher discarding costs (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 54

55. TABLE 3–3 Estimated Cost Effectiveness of Autologous Blood Donations (c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 55 Total Hip Replacement Coronary-artery Bypass grafting Abdominal Hysterectomy Transurethral Prostatectomy Additional cost per unit of autologous blood transfused QALY per unit transfused Cost effectiveness (row one/row two) $68 0.00029 $235,000 $107 0.00022 $494,000 $594 0.00044 $1,358,000 $4,783 0.00020 $23,643,000