Recent advances in the methods of cost-benefit analysis in healthcare - Matching the art to the science

This paper outlines recent advances in the methods of cost-benefit analysis (CBA). Economic evaluations in healthcare can be criticised for, amongst o ther things, the inappropriate use of incremental cost-effectiveness ratios and the reporting of benefits in terms of cost savings, such as treatment costs averted. Many such economic evaluations are, according to the 'scient ific' definition, CBAs. The 'balance-sheet' (or opportunity cost) approach is a form of CBA which can be used to identify who bears the costs and who reaps the benefits from any change. Whilst the next stage in a CBA, as defi ned in health economics, would require that all costs and benefits be value d in monetary terms, the balance-sheet approach, however, advocates that av ailable monetary values can be augmented by other measures of cost and bene fit. As such, this approach, which has a theoretical basis, is proposed as a practical prescription for CBA and highlights the notion that unquantifie d benefits are important and can be included within CBAs even when monetari sation is not possible. Recent methodological developments in monetary valuation for use in CBA are the development of the technique of willingness to pay, the use of conjoin t analysis (CA) to elicit willingness-to-pay (WTP) values and advances in t he debate on the inclusion of production gains in CBAs. Whilst acknowledgin g that there have been developments in each of these areas, it is claimed t here has also been progress in using CBA as a framework for evaluation, as reflected by the balance-sheet approach. The paper concludes by stating that almost ail types of economic evaluation have an element of the 'cost-benefit' approach in them. The important issu e is to focus on the policy question to be addressed and to outline the rel evant costs and benefits in a manner which assists the evaluation of welfar e changes resulting from changes in healthcare delivery. The focus should n ot be on moulding a question to lit a hybrid definition of an analytical te chnique.