Lecture_4_-_Overview_of_CEA

Lecture_4_-_Overview_of_CEA - Cost-Effectiveness Analysis...

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Cost-Effectiveness Analysis Theoretical underpinnings of CEA Solving the resource allocation problem Basic steps in performing a CEA Further issues in CEA
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Cost-effectiveness analysis Theoretical underpinnings of CEA Solving the resource allocation problem Basic steps in performing a CEA Further issues in CEA
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What makes a decision hard? Urgency Uncertainty o Uncertainty about the state of nature o Has the cancer metastasized, or is it still localized? o Uncertainty about the consequences of actions o What will happen if we give chemotherapy to this cancer patient?
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One more thing that makes decisions difficult … Conflicting objectives o increase life expectancy o improve quality of life o On may addressed this conflict by using QALYs o limit the use of scarce resources
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How do you analyze a decision that tries to balance health gains and costs? o Economic evaluation o Cost-effectiveness analysis (CEA) o Cost-benefit analysis (CBA) We’ll focus on CEA o Most widely applied method o Medline search for articles with “cost-effectiveness” or “cost-effective” (with or without the hyphen) in 1999: as subject: 3791 articles in title: 515 articles o Most widely accepted method
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Principles underlying economic evaluation Unlimited wants Finite resources Inevitability of choices Balance of benefits and costs Need for formal analysis
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Purpose of economic evaluation To assist decision makers in choosing from among competing alternatives, in situations of uncertainty and limited resources
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Economic evaluation and decision analysis CEA is really just a special kind of decision analysis o Like standard decision analysis, except we care about two outcomes : expected health effects and expected cost Suppose we have used decision analysis models to calculate the expected costs and expected health outcomes for two or more treatments o How do we choose from among the treatments?
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Cost-effectiveness analysis Theoretical underpinnings of CEA Solving the resource allocation problem Basic steps in performing a CEA Further issues in CEA
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Solving the resource allocation problem One approach: constrained optimization Two ways of framing the problem: o What allocation of resources will achieve the greatest gain in health that is attainable without exceeding the volume of available resources? o What allocation of resources will minimize our expenditures, subject to the requirement that we achieve at least some target level of health gain?
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Solution 1. Identify sets of mutually exclusive programs 2. Within each set: a. Eliminate strongly and weakly dominated programs More costly, less effective than some competing
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This note was uploaded on 03/18/2011 for the course ECO 353 taught by Professor Johnrizzo during the Spring '11 term at SUNY Stony Brook.

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Lecture_4_-_Overview_of_CEA - Cost-Effectiveness Analysis...

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