Topic G Cost-Benefit Analysis

Question 1

Cost-Benefit Analysis

Answer 1

A pharmacoeconomic analysis that compares both costs and benefits (=outcomes) in monetary units

Question 2

Cost-Benefit Analysis

Answer 2

Originally introduced in effort of aiding economic welfare decision regarding public policy. Now it is used in irrigation and flood control, wildlife, air quality etc.

Question 3

Advantages of CBA

Answer 3

Many different outcomes can be compared as long as the outcomes measures are valued in monetary units. Can compare multiple programs with varying outcomes.

Question 4

Advantages of CBA

Answer 4

Very useful in determining which programs or intervention has the greatest benefit among multiple options “Which program will provide the greatest benefit among the multiple alternatives?”

Question 5

Disadvantages of CBA

Answer 5

Placing economic values on medical outcomes is not an easy task. It can lead to biased or inaccurate estimates of the outcomes.

Question 6

Components of CBA

Answer 6

Costs & Benefits

Question 7

CBA Costs

Answer 7

Direct medical and direct non-medical

Question 8

CBA Benefits

Answer 8

Direct medical, direct non-medical, Indirect: (HC), (WTP) and Intangible: (WTP)

Question 9

Cost vs. Benefit

Answer 9

Direct medical costs vs. Direct medical benefit

Question 10

Human Capital (HC) Method

Answer 10

Indirect Benefits: Increases (=prevents the decrease) in productivity or earnings because of a program or intervention. Estimates wage and productivity losses because of illness, disability, or death. Calculation: Wage rate and Missed time

Question 11

HC Example

Answer 11

Average Income: $40,000
Average Work Days: 240 days
This patient used to miss 20 days per year from work before utilizing asthma program. After utilizing asthma program, now she misses 7 days per year from work.
Indirect benefit (=Cost saving): (20-7) x 167 = $2,171
(167 is the daily wage rate) - 40,000/240 = 167/daily

Question 12

HC Calculation

Answer 12

(Difference of the days missed work) x (Daily Wage Rate) = $$$

Question 13

HC Disadvantage

Answer 13

Personal wage differences
Does not consider health-related quality of life such as pain & suffering

Question 14

Willingness-to-Pay (WTP) Method

Answer 14

To determine “how much people are willing to pay to reduce the chance of an adverse health outcome”
It incorporates patient preferences and intangible benefits such as quality of life.

Question 15

WTP: Bidding Vehicles

Answer 15

Open Ended Questions
Closed Ended Questions
Bidding Games
Payment Card

Question 16

Open Ended Questions

Answer 16

“How much would you be willing to pay for the program or intervention?”
It is used the least because: It leads to a wide range of the values and many respondents do not know what values to put in.

Question 17

Closed Ended Questions

Answer 17

Take it or Leave it
Uses only one WTP value

Question 18

Bidding Games

Answer 18

Several bids (3 times is optimal) are offered to reach a person’s maximum WTP
Time Consuming.
“If yes, ask…” “If no, ask….”

Question 19

Payment Card

Answer 19

Provides the respondents with a list of possible WTP amounts to choose from. Very easy to use and provides a range of values at the same time.

Question 20

2 Ways to Present CBA

Answer 20

Net Benefit or Net Cost: Subtraction
Benefit to Cost Ratio or Cost to Benefit Ratio: Division

Question 21

Net Benefit OR Net Costs

Answer 21

Net Benefit = Total Benefits - Total Costs
Net Cost = Total Costs - Total Benefits

Question 22

Interventions are considered to be cost beneficial if:

Answer 22

Net Benefit > 0 or Net Cost < 0

Question 23

Benefit to Cost Ratio or Cost to Benefit Ratio

Answer 23

Total Benefits/ Total Costs
Total Costs/ Total Benefits

Question 24

Interventions are considered to be cost beneficial if:

Answer 24

Benefit to Cost > 1 OR Cost to Benefit < 1