In healthcare, analysis of healthcare resource expenditure relative to the expected medical benefits is helpful in setting priorities and healthcare decision-making. It involves a systematic analysis of the costs, benefits and effectiveness of public health investment alternatives. Cost-effectiveness analysis is important in the determination of efficient medical choices and in medical decision-making.
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Cost-effectiveness analysis is used to assess whether the benefits of a new treatment or any other healthcare program match its cost. However, cost-effectiveness analysis alone cannot be used to adequately assess the allotment efficiency of a treatment program; that is, whether the extra costs relative to the status quo are worth the benefits expected (Donaldson, Currie, & Mitten, 2002, p.234). Relevant data on the effectiveness of a proposed treatment program and its corresponding cost can be considered jointly in a matrix. The program is worth undertaking if costs are saved with greater effectiveness achieved relative to the existing care (Huang, Zhang, Sydney, Melinda, David, & Marshall, 2007, p.2179). In this regard, the cost-effective analysis should involve neither comparisons of different population subgroups nor the element of the incremental cost-effectiveness ratio. Otherwise, it raises issues about opportunity costs and allocative efficiency (Trueman, Drummond, & Hutton, 2001, p.609).
The aforementioned reasoning provides insights into the cost-effectiveness considerations prior to the adoption or rejection of a particular intervention program (Litvak, Long, & Schwartz, 2000, p.254). For instance, a study conducted by Kim and Goldie on the cost-effectiveness of including boys in vaccination program established that the program was not cost-effective considering the incremental cost-effectiveness ratios was not included initially (2009, p.97). In contrast, a study conducted by Huang et al. established that the HDC program was found to be cost-effective considering when incremental cost-effectiveness ratio parameter is considered.
Donaldson et al.’s rationale has implications on current policy and potential change in policy. With regard to efficiency and resource allocation, the cost-effectiveness of an intervention program can be determined by evaluating the expected increase in output or efficiency relative to the further resources required.
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Huang, E., Zhang, Q., Sydney, E., Melinda, L., David, O., & Marshall, C. (2007). The Cost-Effectiveness of Improving Diabetes Care in U.S. Federally Qualified Community Health Centers. Health Services Research, 42(6), 2174-2193.
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