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Cost and Benefits. Introduction. Is treatment X worth it?. Cost-Benefit Analysis. Devote resources to an activity until the marginal benefit equals the marginal cost. Determining Value. Willingness To Pay (WTP) Surveys Market data (compensating differentials in labor markets)
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Introduction • Is treatment X worth it?
Cost-Benefit Analysis • Devote resources to an activity until the marginal benefit equals the marginal cost.
Determining Value • Willingness To Pay (WTP) • Surveys • Market data (compensating differentials in labor markets) • Human Capital Approach • Estimate future earnings, used in accidental death injury cases.
Cost Effectiveness • Incremental cost effectiveness analysis
Cost-Utility Analysis • CUA is CEA with utility as a measure of benefits. • Useful for multi-dimensional problems • Utility proxied by Quality Adjusted Life Years or Disability Adjusted Life Years
Quality Adjusted Life Year (QALY) • Standard gamble method • Time trade-off method
Problems with CEA • Whose utility function? • Patients or public? • When to measure? • Mean or median? • Non-independence of value of health and wealth and consumption patterns
Inequality in health • Americans with Disabilities act. Should their well being be considered equally?
Practical Problems • Should fixed costs be taken into account?
