Cost Benefit Analysis

Question 1

How does CBA measure?

Answer 1

Measures both costs (inputs) and outcomes in dollars ($$$)

Question 2

What are the advantages and disadvantages of CBA?

Answer 2

Advantages:
* Healthcare providers can assess whether the benefits of a product or service will exceed its costs.
* Ratio > 1 = cost-beneficial
* Ratio < 1 = not cost-beneficial
* Healthcare providers can compare multiple products or services with different outcomes.

Disadvantages:
* Difficult to assign a monetary value on health outcomes

Question 3

What are the advantages of using CBAs over CEA?

Answer 3

1. BC ratios are used to determine if a program costs are higher that its benefits and vice versa
2. TO maximize $$$ investment -> choose program with highest B-C ratio

Question 4

What are steps of conducting a CBA?

Answer 4

1. Determine the type of program or intervention to be considered in the CBA.
2. Identify alternatives
3. Identify the cost and benefits from the appropriate perspective:
   * Costs: direct medical & direct non-medical costs
   * Benefits: direct (medical & non-medical), indirect (productivity), and intangible benefits
   Perspective: recommended that CBAs should be conducted from the societal perspective

Question 5

What are societal costs?

Answer 5

Costs to:
1. Insurance company
2. Patient
3. HCP/instituation
4. Sector costs
5. Indirect costs due to loss of productivity

Question 6

What are the advantages and disadvantages of using societal perspective?

Answer 6

Advantages: most appropriate prespective according to economic theory
Disadvantages: difficult, labor-intesive process to estimate all types of costs to society

Question 7

What are the components of CBA?

Answer 7

Question 8

What are the methods used to calculate health benefits?

Answer 8

1. Human capital method
2. Willingness to pay method

Question 9

What is HC method?

Answer 9

1. Measures indirect benefits
2. Estimates loss of wages and productivity due to illness, disability, or death
3. Assumes health benefits value is equal to the economic productivity that they allow

Question 10

Define the components of HC?

Answer 10

Wage rate: estimated from income data
Missed time due to illness: estimated by self-reports

Question 11

How do you calculate wage rate?

Answer 11

1. Yearly wage rate: Includes wages, plus fringe benefits used for a service that reduces long-term disability or death
2. Daily wage rate: Used for service focused on acute or chronic illness with short-term disability

Question 12

How do you calculate missed time?

Answer 12

1. Yearly wage rate: Assess the number of years lost due to illness
2. Daily wage rate: Assess the number of missed days due to illness

Question 13

What are the advantages of using HC?

Answer 13

1. Easy, straightforward calculations: most common method for measuring indirect benefits
2. Income estimates readily available from public resources
3. Days lost from illness readily available from patient reports

Question 14

What are the disadvantages of HC?

Answer 14

1. Biased against specific demographics
2. Biased assumption that value of health benefits = economic productivity they allow
3. Does not factor values for pain & suffering if they do not affect productivity

Question 15

What are the types of WTP methods?

Answer 15

1. Contingent valuation (CV): method for determining WTP amount
2. Hypothetical Scenario: Describes a new healthcare program or intervention
3. Bidding Vehicles

Question 16

What are the types of bidding vehicles?

Answer 16

1. Open-Ended Questions
2. Closed-Ended Questions
3. Bidding Game
4. Payment Card

Question 17

What is the Least common method used in the WTP approach?

Answer 17

Open ended questions:
1. Wide variation
2. General public likely doesnt know how to value HC programs

Question 18

What are the advantages and disadvantages of closed ended questions?

Answer 18

Advantages: Close resemblance to the real-world marketplace
Disadvantages: One question = one WTP value -> meaning a large sample size is necessary to calculate WTP

Question 19

What are the advantanges and disadvantages of bidding game?

Answer 19

Advantages: method to obtain a participant’s maximum WTP value
Disadvantages:
* TIme consuming
* Only appropriate to conduct in a face-to-face interview or online
* Potential “starting point bias” -> dependent on how high/low the first WTP bid is

Question 20

What are the advantages and disadvantages of using payment card?

Answer 20

Advantages: easy to perform, provides a range of potential WTP values
Disadvantages:
* Only appropriate to conduct in a face-to-face interview or online
* Potential “starting point bias” -> dependent on how high/low the first WTP bid is

Question 21

What are the advatnages of WTP?

Answer 21

1. Method to assign a monetary ($) value to intangible benefits
2. Accounts for patient preferences and choice

Question 22

What are the disadvantages of WTP?

Answer 22

1. Questionable validity of WTP responses based on methods to determine monetary values
2. Compliance bias
3. Strategic bias
4. Range bias
5. Starting point bias

Question 23

What are the CBA formats?

Answer 23

1. Net benefit (or net cost) calculations
2. Benefit-to-cost ratio
3. Internal rate of return

Question 24

How do you calculate present value? Discount factor?

Answer 24

PV = FC x DF

1/〖(1+𝑟)〗^𝑛

Question 25

How do you calculate net benefit and net cost?

Answer 25

Net Benefit = Total Benefits – Total Costs

Net Cost = Total Costs – Total Benefits

Question 26

How do you calculate B-C and C-B ratio?

Answer 26

Benefit-Cost (B-C) ratio = (𝑇𝑜𝑡𝑎𝑙 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠)/(𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡𝑠)

Cost-Benefit (C-B) ratio = (𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡𝑠)/(𝑇𝑜𝑡𝑎𝑙 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠)