Basic Cost Analysis and Economic Evaluation

Cost analysis studies should be made to determine the long term effectiveness of health education programs in reducing personal health care costs for persons with specific types of health problems.

President’s Committee on Health Education, 1971

Introduction

Because of the complexity of the topic and the large literature base, it is beyond the scope of this chapter to present a comprehensive review and examples of all types of cost and economic evaluation methods and case studies. Complete discussions are available in multiple health economics texts, and health services research literature. This chapter presents a synthesis of basic principles and methods, and provides examples of the application of common cost and economic evaluations of Health Promotion-Disease Prevention and Management (HP-DP) programs. It builds on the evaluation methods and case material presented in Chapters 1 through 5. The primary purposes of Chapter 6 are to assist the HP-DP professional (1) to become a more knowledgeable and informed consumer of cost and economic evaluation methods and oral and written reports, and (2) to be a more confident participant in discussions of cost-effectiveness analysis (CEA) and cost-benefit analysis (CBA), and planning of HP-DP programs. Although the chapter is designed for the MPH/MSPH/MS students in training, master’s trained HP-DP specialists, or staff working in public-population health programs, students in a DrPH/PhD/DSc program will also find its content and methods useful.

A decade after the President’s Committee on Health Education Report, Warner and Luce in “Cost-Benefit and Cost-Effectiveness Analysis in Health Care” (1982) indicated, “The potential significance and nature of CEA-CBA contributions to healthcare resource allocation have yet to be established.” While there have been a multitude of CEA and CBA studies since these publications, many contemporary sources in Health Promotion-Disease Prevention (HP-DP) reflect ambivalence about progress in this area. In approaching a discussion of economic evaluation of an HP-DP program, it is important to emphasize that cost is only one dimension of decision-making about a programs’ value. While cost will usually (but not always) be an issue in the development of a new program and health policy or a significant revision of an existing program, quality, effectiveness, and equity should be the primary criteria when an agency is deciding what interventions should be routinely delivered. Unfortunately, political issues play a dominate role, often regardless of the cost, in the decision to create and introduce new HP-DP, public health, or new healthcare policies or services programs (e.g., ObamaCare?).

At least two basic questions need to be asked and answered in planning and defining an HP-DP program and its costs. What do specialists in a field define as the most appropriate, minimum “best practice or evidenced-based” intervention that trained, regular staff, or HP-DP specialist staff should provide to eligible individuals who should receive it? If an impact evaluation and meta-evaluation confirm that a new multi-component intervention is significantly more effective than an existing program, what will the HP-DP program cost an agency, system, or organization to introduce, to improve, or to significantly expand an existing program? This chapter describes methods to help answer these questions and other pertinent issues.

 
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