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Mathematics 209 Proposal

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13 views3 pages

Mathematics 209 Proposal

Uploaded by

Gusti Ragil Apriliano
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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James Clarke

MATHEMATICS

MATHEMATICS_209_PROPOSAL

Cost–utility analysis (CUA) is a form of economic analysis used to guide procurement

decisions.The most common and well-known application of this analysis is in

pharmacoeconomics, especially health technology assessment (HTA).== In health

economics ==

In health economics, the purpose of CUA is to estimate the ratio between the cost of a

health-related intervention and the benefit it produces in terms of the number of years lived

in full health by the beneficiaries.Hence it can be considered a special case of cost-

effectiveness analysis, and the two terms are often used interchangeably.Cost is measured

in monetary units.Benefit needs to be expressed in a way that allows health states that are

considered less preferable to full health to be given quantitative values.However, unlike

cost–benefit analysis, the benefits do not have to be expressed in monetary terms.In HTAs it

is usually expressed in quality-adjusted life years (QALYs).If, for example, intervention A

allows a patient to live for three additional years than if no intervention had taken place, but

only with a quality of life weight of 0.6, then the intervention confers 3 * 0.6 = 1.8 QALYs to

the patient.(Note that the quality of life weight is determined via a scale of 0-1, with 0 being

the lowest health possible, and 1 being perfect health).If intervention B confers two extra

years of life at a quality of life weight of 0.75, then it confers an additional 1.5 QALYs to the

patient.The net benefit of intervention A over intervention B is therefore 1.8 – 1.5 = 0.3

QALYs.The incremental cost-effectiveness ratio (ICER) is the ratio between the difference in

costs and the difference in benefits of two interventions.The ICER may be stated as (C1 –
C0)/(E1 – E0) in a simple example where C0 and E0 represent the cost and gain,

respectively, from taking no health intervention action.C1 and E1 would represent the cost

and gain, respectively of taking a specific action.So, an example in which the costs and gains,

respectively, are $140,000 and 3.5 QALYs, would yield a value of $40,000 per QALY.These

values are often used by policy makers and hospital administrators to determine relative

priorities when determining treatments for disease conditions.It is important to note that

CUA measures relative patient or general population utility of a treatment or

pharmacoeconomic intervention.Its results give no absolute indicator of the value of a

certain treatment.The National Institute for Health and Care Excellence (NICE) in the UK has

been using QALYs to measure the health benefits delivered by various treatment

regimens.There is some question as to how well coordinated NICE and NHS are in making

decisions about resource allocation.According to a recent study "cost effectiveness often

does not appear to be the dominant consideration in decisions about resource allocation

made elsewhere in the NHS".While QALYs are used in the United States, they are not utilized

to the same degree as they are in Europe.In the United Kingdom, in January 2005, the NICE

is believed to have a threshold of about £30,000 per QALY – roughly twice the mean income

after tax – although a formal figure has never been made public.Thus, any health

intervention which has an incremental cost of more than £30,000 per additional QALY

gained is likely to be rejected and any intervention which has an incremental cost of less

than or equal to £30,000 per extra QALY gained is likely to be accepted as cost-effective.This

implies a value of a full life of about £2.4 million.For end of life treatments, a higher

threshold of £50,000 per additional QALY gained is used by NICE.In North America, a

similar figure of US$50000 per QALY is often suggested as a threshold ICER for a cost-

effective intervention.A complete compilation of cost–utility analyses in the peer reviewed

medical literature is available at the CEA Registry Website


=== Advantages and disadvantages ===

On the plus side, CUA allows comparison across different health programs and policies by

using a common unit of measure (money/QALYs gained).CUA provides a more complete

analysis of total benefits than simple cost–benefit analysis does.This is because CUA takes

into account the quality of life that an individual has, while CBA does not.However, in CUA,

societal benefits and costs are often not taken into account.Furthermore, some economists

believe that measuring QALYs is more difficult than measuring the monetary value of life

through health improvements, as is done with cost–benefit analysis.This is because in CUA

you need to measure the health improvement effects for every remaining year of life after

the program is initiated.While for cost–benefit analysis (CBA) we have an approximate

value of life ($2 million is one of the estimates), we do not have a QALY estimate for nearly

every medical treatment or disease.In addition, some people believe that life is priceless and

there are ethical problems with placing a value on human life.Also, the weighting of QALYs

through time-trade-off, standard gamble, or visual analogue scale is highly subjective.===

Criticism of cost–utility analysis ===

There are criticisms of QALY.One involves QALY's lack of usefulness to the healthcare

provider in determining the applicability of alternative treatments in the individual patient

environment, and the absence of incorporating the patient's willingness to pay

(i.e.behavioral economics) in decisions to finance new treatments.

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