Key points
- Compares intervention cost and benefits to determine health outcomes monetary value
- Can be used to compare health and non-health interventions
What is cost-benefit analysis?
Cost-benefit analysis is a way to compare the costs and benefits of an intervention, where both are expressed in monetary units.
Fact
What inputs are included?
- Costs including those of implementing an intervention.
- Benefits including those resulting from an intervention, such as medical costs averted, productivity gains, and the monetized value of health improvements.
What output does a cost-benefit analysis provide?
CBA provides the net benefits (benefits minus costs) of an intervention.
Cost-Benefit Analysis Example
The provides the results from a CBA of an intervention to reduce trans fats in the food supply.
Monetary Valuation
The analysis estimates that the following benefits are worth $140 billion:
- Direct medical costs averted
- Valuation of quality of life gained due to non-fatal heart attacks averted
- Valuation of life years gained due to fatal heart attacks averted
Next, the analysis estimates that costs to the industry and consumers are $6 billion.
Calculation of Net Benefits
Benefits - Costs = Benefits
$140 billion in benefits - $6 billion in costs = $134 billion in net benefits
Based on this information, the intervention could generate $134 billion in net economic benefits.
For additional information, please see the examples used in the online training.
How can decision makers use this information?
CBA's estimated net benefit offers a sense of the economic value provided to society by an intervention.
Decision makers can also use CBA to compare health and non-health interventions because both costs and benefits are expressed in monetary units. For example, CBA could be used to compare health and environmental interventions.