Cost Benefit Analysis

Question 1

Costs are measured in $
* Benefits are measured in $
* Often conducted as a with/without evaluation

Answer 1

Cost Benefit Analysis

Question 2

Cost Benefit Analysis

Will the benefits of a program exceed the costs of
implementing it?
-assess a single program

• Which program will produce the greatest net benefit?
• examine multiple programs with unrelated outcomes

Question 3

If the net cost is less than zero then program costs more

Question 4

In this type of study we have to assign clinical benefit some type of monetary association rate…what is the value of a vaccinated kid

Question 5

Cost Benefit Analysis
Least used method of all the
pharmacoeconomic methods
Ex: ~30 CBAs/year versus ~1000 CEAs/
year
➢ Most focus on health care programs
and interventions
-usually do not focus on comparing
specific drug treatments

Question 6

Types of Cost Benefit Analysis
Preventive strategies
Pharmaceuticals (___________)

________and counseling (depression,
diabetes, asthma etc)

____________strategies (prenatal, cancer,
HIV/AIDs)

Answer 6

vaccines, education, screening

Question 7

Steps in Conducting Cost Benefit Analysis
2. 1. Identify ________ or intervention
2. Identify _________
3. Identify and measure __________
4. Identify and measure benefits
5. Calculate results

Answer 7

program,alternatives,costs

Question 8

Measuring Indirect and Intangible Benefits
______________
Willingness-to-pay method

Answer 8

Human Capital

Question 9

_________________
Value of health benefits=the economic productivity they permit
* The human capital method equates the value of human life to
the discounted market value of the output produced by an
individual over an expected lifetime.
-Cost of disease = lost productivity
▪ Cost of a sick day=how much you earn that day

Answer 9

Human Capital

Question 10

Human Capital

Use discounted values of expected earnings
Census estimates
-Age, gender, education

Labor income is estimated as before-tax
income
-non-labor income is excluded (interest, etc.)

Use market values for non-market activities
-unpaid household work, child care etc.

Question 11

Calculating Productivity Using Human Capital Approach

Wage rate
Ex: Daily wage rate X number of missed
days

Question 12

Human Capital

Problems:
❑ _________ against specific groups
❑ Earnings may not ______the value of
outputs
❑ Does not include values for _____ and
suffering if the disease or condition
does not impact productivity (e.g.,
erectile dysfunction, menopause)

Answer 12

Biased, equal, pain

Question 13

Intangible Benefits

Intangible costs/benefits

Costs of pain, suffering, anxiety, fatigue
that occur because of illness

Intangible benefits are the ‘cost savings’
that result from a reduction in pain and
suffering

Question 14

Intangible Benefits

Valuation of goods/services are easier for
marketed vs non-marketed products/services
-Coffee or pair of jeans vs. healthcare
✓ Valuation of goods/services based on:
-need (pain/suffering, productivity, etc. )
-resources
-preferences

Question 15

Determines how much people are wiling to pay to reduce a chance of an adverse health outcome.

Ex.: If a person is willing to pay $50 for a 30 min visit with a pharmacist to improve diabetes management, then the intangible benefit would be $50.

Answer 15

Willingness to Pay

Question 16

How to Assess WTP?

Provide a hypothetical scenario describing
service/intervention (include time for the intervention and
expected benefit)

Use a bidding vehicle to elicit the WTP values
-open-ended questions
-close-ended questions (‘take it or leave it’)
-bidding game
-payment card

Question 17

Cost benefit calculation is net benefit or benefit to cost ratio

Question 18

Valuation is a group of products are presented a product and asked people how much are you willing to pay for them and for products its easier but its harder for disease management services its more complicated because you have to explain this to the pt

Question 19

______________ example: What is the maximum amount that you would be willing to pay for a 1-hour consultation with a pharmacist?

Answer 19

Open-ended questions

Question 20

________________ example:
Would you be willing to pay $60 for a 1-hour consultation with a pharmacist?
Yes or NO

Answer 20

Close-ended questions

Question 21

____________ is would you be willing to pay $50 well how about this instead of $70 would you be willing to pay (double check)

What is the maximum amount that you would be willing to pay for a 1-hour consultation with a pharmacist?
If yes, ask: “Would you be willing to pay $80?”
If no, ask: “Would you be willing to pay $40?”

Answer 21

Bidding game

Question 22

_____________place different credits in front of pt so they can decide whether are willing to pay for an encounter with a pharmacist to obtain diabetes services

Answer 22

Payment method

Question 23

Depending on which estimates we take…these estimates we are not using the averages some of the bias can crop in so a elementary school teacher doesn’t make the same as a football player there is some disparity and human capital DOESN’T include intangible costs

Question 24

Cost benefit is usually estimated several years ahead and that’s where we apply discounted values but also estimates for earnings and we can take from census which is usually taken before tax-income say mom is unemployed who takes care of child and if mom were to work she would have to hire a babysitter and that costs a lot of money…we can monetize for someone not in the workforce currently

Question 25

With human capital we will valuing the health benefits that a program brings in terms of the economic productivity that it allows…so essentially how many sick days will be avoided through the fact that the patient now is healthy and keeps working and without need to take time off…we can utilize the value of an hour of labor to determine what is that will be multiplied the days by

Question 26

Cost Benefit looks into with or without assessment…it looks into vaccination programs whether we vaccinate or not vaccinate we look into some type of disease management program whether we provide them or proceed with care as usual versus in cost effectiveness but with cost utility we do have 2 alternatives some type of therapeutic alternative one versus therapeutic alternative

We can proceed with evaluation of one program and then try to understand the net benefit associated with running it or the benefit to cost ratio which answers the question is there extra money generated after we run the program or is it 1 to 1…or it saves money

Cost benefit analysis tries to understand if it saves money by exactly how much?
Cost benefit analysis is net benefit absolute for money saved or benefit to cost ratio..1.5 which means we gain 0.50 cents on each dollar invested
Highest benefit to cost ratio is the one that’s adopted

Question 27

We generate the value in terms of ratio dividing benefits over costs the value that gets to be calculated is above 1 it means benefits are higher than the costs and the program saves money and brings extra return

If the net cost is less than zero then program costs more