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Is it really possible to build a bridge between cost-benefit analysis and cost-effectiveness analysis?

Dolan, P. and Edlin, R. (2002) Is it really possible to build a bridge between cost-benefit analysis and cost-effectiveness analysis? Journal of Health Economics, 21 (5). pp. 827-43. ISSN 0167-6296

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Abstract

Cost-benefit analysis (CBA) is a recognised as the economic evaluation technique that accords most with the underlying principles of standard welfare economic theory. However, due to problems associated with the technique, economists evaluating resources allocation decisions in health care have most often used cost-effective analysis (CEA), in which health benefits are expressed in non-monetary units. As a result, attempts have been made to build a welfare economic bridge between cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA). In this paper, we develops these attempts and finds that, while assumptions can be made to facilitate a constant willingness-to-pay per unit of health outcome, these restrictions are highly unrealistic. We develop an impossibility theorem that shows it is not possible to link CBA and CEA if: (i) the axioms of expected utility theory hold; (ii) the quality-adjusted life-year (QALY) model is valid in a welfare economic sense; and (iii) illness affects the ability to enjoy consumption. We conclude that, within a welfare economic framework, it would be unwise to rely on a link between CBA and CEA in economic evaluations.

Item Type: Article
Copyright, Publisher and Additional Information: Comment in: J Health Econ. 2004 Sep;23(5):887-98; Copyright © 2002 Elsevier Science B.V. This is an author produced version of a paper published in Journal of Health Economics. Added in accordance with the publisher's self-archiving policy.
Keywords: *Cost-Benefit Analysis/sn [Statistics & Numerical Data] *Financing, Personal *Health Care Rationing/ec [Economics] Health Status Humans Income/cl [Classification] Life Expectancy *Models, Econometric Public Sector/ec [Economics] *Quality-Adjusted Life Years Risk *Social Welfare/ec [Economics] Value of Life/ec [Economics]
Academic Units: The University of Leeds > Faculty of Medicine and Health (Leeds) > Institute of Health Sciences (Leeds) > Academic Unit of Health Economics (Leeds)
The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield)
Depositing User: Mrs JM Wright
Date Deposited: 17 Jan 2008 10:23
Last Modified: 08 Feb 2013 17:05
Published Version: http://dx.doi.org/10.1016/S0167-6296(02)00011-5
Status: Published
Publisher: Elsevier
Refereed: Yes
Identification Number: 10.1016/S0167-6296(02)00011-5
Related URLs:
URI: http://eprints.whiterose.ac.uk/id/eprint/3579

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