1. Cost and Benefits

2. Introduction Is treatment X worth it?

3. Cost-Benefit Analysis Devote resources to an activity until the marginal benefit equals the marginal cost.

4. 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.

5. Cost Effectiveness Incremental cost effectiveness analysis

9. 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

13. Quality Adjusted Life Year (QALY) Standard gamble method Time trade-off method

14. 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

15. Inequality in health – Americans with Disabilities act. Should their well being be considered equally?

16. Practical Problems Should fixed costs be taken into account?

17. Cost Effectiveness vs Comparative Effectiveness

18. Utilitarian versus Rawlsian