CostEffectiveness

Costeffectiveness is a principle used to assess the value of interventions by comparing their costs with their outcomes. In practice, costeffectiveness analysis (CEA) estimates how much additional cost is required to achieve an additional unit of effect, enabling comparisons across alternatives. The core metric is the incremental cost-effectiveness ratio (ICER): ICER = (Cost of A − Cost of B) / (Effect of A − Effect of B). Effects are commonly measured in life-years gained, quality-adjusted life years (QALYs), or disability-adjusted life years (DALYs).

The analysis takes a chosen perspective (societal, healthcare payer, or patient) and a time horizon, applying discounting to future costs and effects. Results are often presented on a cost-effectiveness plane and via cost-effectiveness acceptability curves, alongside threshold values that reflect willingness to pay for an additional unit of effect. An intervention is generally deemed cost-effective if its ICER falls below the threshold, though thresholds vary by country, budget, and decision context.

Limitations and considerations: ICERs depend on data quality and modeling assumptions; results may not capture equity, distributional effects, or broader societal impact. Thresholds also raise ethical questions about how to value health gains and who receives them. Additionally, costeffectiveness does not imply affordability or necessity; it is a tool for prioritization within resource constraints.

Applications: widely used in health care to compare medicines, screening programs, and public health initiatives; used in environmental economics, education, and transportation to inform policy decisions.