CBA (Exam 1 Cut Off) Flashcards
1
Q
CBA
A
- Cost Benefit Analysis
- Metod for comparing the value of all resources used (costs) for a program/intervention with the value of outcomes achieved (benefits)
- Key: costs and benefits are valued using the same monetary unit
- Ideally benefits are more than just material cost savings: should include evaluations that include indirect and intangible benefits
- If benefits exceed the costs, program may be worthwhile
2
Q
How does CBA differ from CEA?
A
CEA
- Emphasis on minimizing costs to achieve optimal outcomes
- Does not provide information on whether a project/intervention is worth investing the required resources - provides a relative measure
- Addresses production efficiency
CUA/CEA
-Can assist with program decisions when outcomes are in similar units
3
Q
Advantages/Disadvantages of CBA
A
- CBA is braoder in scope than CEA
- Using CBA, decisions about resource allocation can be made within AND between sectors of the economy
- CBA addresses allocation efficiency
- CBA does NOT address production efficiency
- Not always easy to assign monetary values to non-monetary benefits if different methods used between CBA analyses, can also make comparison of findings difficult
4
Q
CBA Questions
A
- Evaluation of single treatment/service or comparison of multiple options
- Given a limited budget, which program should be implemented?
5
Q
Components of CBA
A
- 2 cost and 3 benefit categories
- Cost categories: direct medical and direct nonmedical
- Benefit categories: Direct, indirect, and intangible
6
Q
Cost
A
- Summarizes costs involved with providing the treatment/service
- Ex: Labor, equipment, operational expenses
7
Q
Benefits
A
- Include “cost savings” or “costs avoided”
- Reduction in costs because of an alternate program would usually be classified as a benefit: “Cost saving”
8
Q
Steps Conducting CBA
A
- Reason for evaluation
- Identify and value costs
- Identify and value benefits
- Determine cost and benefit
9
Q
Reason for Evaluation
A
- CBA can provide a more complete picture of the total value
- Many treatments provide additional clinical benefits but at an additional cost
10
Q
Identify & Value Costs
A
- Direct Medical costs: pharmacist time, increased utilization of astham medications
- Direct Nonmedical Costs: travel time for patient to clinic
11
Q
Identify and Value Benefits
A
- Easily measured monetary values with direct medical and nonmedical costs
- Must assign monetary values to indirect and intangible benefits too
- Two methods for assigning monetary value: human capital (70-80% of studies) and Willingness-to-Pay
12
Q
HC Approach
A
- Estimated increases of actual earnings/productivity because losses no longer occur
- “Pay back” value of health benefits - person’s renewed or increased ability to be productive for society
- Need wage rate and time gained
- Limitations: Only considers time for employable persons, inequities due to degree of economic productivity, intangible benefits cannot be evaluated
13
Q
Willingness-to-Pay
A
- Estimate of how much someone willing to pay to not have an adverse outcome
- Can be used to value both indirect and intangible benefits
- Incorporates preferences
- Limitations: measurement biases exist, difficult to place dollar values on intangibles, WTP tend to be higher than HC
14
Q
VSL
A
- Value of statistical life
- Does not estimate the value of life
- Average estimate of what an individual is WTP to reduce a certain risk level or accept a certain risk level
- Varies based on associated risk and the population
- Extensions in life expectancy are assigned a value for a statistical life-year
- Large and controversial literature on the economic value of a life-year
15
Q
Determining Costs and Benefits
A
- Benefit Cost Ratio = Sum of Benefits/Sum of Costs
- Net Benefit = Sum of Benefits - Sum of Costs
- Meed to discount future projections greater than one year away
16
Q
Criteria for Evaluating CBA
A
- Program is Beneficial: NB > 0, B/C > 1
- Neutral: NB = 0, B/C = 1
- NOT Beneficial: NB <0 or B/C < 1
- May need to consider IRR or hurdle rate
- B/C ratios need to be approached with caution regarding the degree to which some components have been considered as costs or cost savings
17
Q
Hurdle Rate
A
- Minimum return rate necessary to approve project
- Often the cost of acquiring capital or rate that could be earned on other investments
18
Q
IRR
A
-Rate of return where discounted benefits = discounted costs
19
Q
CBA Decision Rules
A
- Criteria for decision depends on multiple factors
- Include budget restraints, availability of funds to support program, context of evaluation, perspective of decision maker, whether the program fits in with long term strategies and goals
- Also need to consider if there is a fixed budget and if there are alternative investments
