Cost Effectiveness Analysis (CEA)

Cost-effectiveness analysis (CEA) is a decision-making tool that helps compare different ways to achieve a goal in terms of their resource utilization (cost) and outcomes (effectiveness). It can be used to find the cheapest way to achieve a goal, or to estimate the expected costs of achieving a particular outcome. It can also be used to compare the impacts and cost of various alternative means of achieving the same objective. The result of a CEA is expressed in a ratio (cost-effectiveness ratio, CER) between cost and outcome.

Cost-effectiveness analysis (CEA) vs. cost-benefit analysis (CBA)
There are a few key differences between cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA). CBA measures the monetary value of all costs to all benefits, whereas CEA only calculates costs to outcomes of interest. This means that CBA is useful for making cross-comparative decisions across vastly different interventions (i.e., agriculture versus education), while CEA is used for comparing programs with common outcome(s) in mind, or when using nonmonetary values as well as monetary values are relevant to decision-making purposes.

CEA is more rigorous and in-depth than CBA, but it assumes a specific post-intervention trajectory. In contrast, CBA does not make any assumptions about the future and can be used for both pre- and post-intervention comparisons. Another important distinction is that while CBAs require a number of assumptions about the monetary values of all benefits, CEAs are transparent, simple and objective. Finally, while CBA measures the monetary value of all costs to all benefits, CEA only calculates costs to outcomes of interest.

While CBAs provide more information than CEAs about potential outcomes after an intervention, they are less able to calculate the cost of an intervention with respect to its benefits or effectiveness only. In contrast, CEAs are able to calculate the cost of an intervention with respect to its benefits or effectiveness only and can provide more detailed information about potential outcomes after an intervention.

When making decisions about which interventions to pursue, it is important to consider both CBA and CEA. However, given that CEAs are more rigorous and in-depth than CBAs, they should be used when there is a specific post-intervention trajectory in mind or when nonmonetary values as well as monetary values are relevant to decision-making purposes.

Why Use Cost-Effectiveness Analysis?
There are many reasons why an organization might want to use cost-effectiveness analysis. Perhaps the most important reason is that it allows organizations to identify low-cost, high-impact interventions. For example, each year more than a million young children die from dehydration when they become ill with diarrhea. However, oral rehydration therapy is a way of treating diarrhea that does not diminish its severity or mortality rate. Oral rehydration therapy cost only $2-$4 per life year saved and was promoted by public policy to help save millions of lives worldwide .

Another reason for using cost-effectiveness analysis is that it helps identify where to allocate resources in order to maximize impact. A study at Harvard University focused on the 185 interventions which cost US$21 each year . This type of analysis can help countries make decisions about which interventions are most effective and allocation of funds.

Cost-effectiveness analysis is not always feasible, in which case spending might be directed towards more cost-effective interventions instead. However, if done correctly, this process can provide valuable insights into how best to allocate resources in order to achieve the greatest impact possible.

Challenges to conducting CEA
It is no secret that conducting a Cost-Effectiveness Analysis (CEA) can be difficult. In fact, many challenges exist when trying to measure the cost of an intervention and its impact on a single outcome. For one, it can be hard to obtain accurate cost estimates from other sources. This is due in part to exchange rates, inflation rates, and discount rates- which make comparisons between studies or programs difficult.

Another challenge faced when conducting CEA is that they often take a long time to complete. Aggregating across multiple outcomes also proves to be difficult- especially when trying to measure costs over different time periods.

Despite these challenges, there are some considerations for how to calculate costs that researchers must take into account. These include research methods, economic assumptions, and what impacts you want to measure/costs over which time periods/etc..

One exception where CEA has been used in the past is with "National recommendations on immunization policy." The Centers for Disease Control and Prevention's Advisory Committee on Immunization Practices uses Cost-Effectiveness Analysis as a tool when making national recommendations about immunizations.

However, using CEA evidence for health care decisions is not uncontroversial in America. Many people are resistant to the idea of accepting limits on the delivery of health care. This may be partly due to a lack of understanding about what rationing would entail and how it would affect them personally. However, conducting CEA remains an important tool in assessing the value of health technology. Methods have been improved over time, but there is still room for growth in this area.