Exercise: Cost-Effectiveness Analysis I

This sample exercise and solution set supports the teaching pack on Cost-Effectiveness Analysis I, in which students are introduced to economic evaluation as it relates to public health and learn to distinguish between cost-effectiveness and benefit-cost analyses. They learn the concepts of opportunity cost, incremental cost-effectiveness analysis and incremental cost-effectiveness ratios. Finally, students are shown the steps used to conduct a shopping spree cost-effectiveness analysis designed to maximum health under a budget constraint. In addition to the sample exercise, materials include an instructor's note, videos, companion slides, a glossary, and an annotated bibliography.

Learning Objectives

1. Explain why economic evaluation is relevant to public health and distinguish cost-effectiveness analysis from benefit-cost analysis.
2. Explain what is meant by “opportunity cost," “incremental cost-effectiveness analysis,” and “incremental cost-effectiveness ratio.”
3. Perform the steps of cost-effectiveness analysis to maximize health under a budget constraint (‘shopping spree’) by selecting from a list of independent programs that may be considered in any combination.

The exercise provides just 2-3 simple examples of the types of short questions that can be useful for practicing some of the skills covered in this teaching pack. These should be modified, tailored, and expanded upon to meet the goals of specific classes.

This teaching pack was developed by Sue J. Goldie at the Center for Health Decision Science, Harvard T.H. Chan School of Public Health. The multimedia components were developed as part of a series of pilots in the CHDS Media Hub, led by Jake Waxman, where media-based pedagogy experiments contribute to new ways of thinking about short form content.