IMPROVING HEALTH-CARE OUTCOMES THROUGH REALLOCATION OF HEALTH-CARE EXPENDITURES

The use of incremental cost-outcomes ratios as decision variables by t hose working in the area of pharmacoeconomics is commonplace. Unfortun ately, few question the assumptions implicit in the use of such ratios . In this paper, the author argues that under certain reasonable assum ptions regarding the production of health care and alternative therapy options, if partial substitution or switching between therapy options occurs, it may be possible not only to stay within an initial health care budget but also to yield higher total outcomes for the treating p opulation. This argument is presented by developing a model of health care costs and outcomes in a dual-therapy environment.