Cost Utility Analysis in Health Policy

Abstract

The problem of valuing the benefits of health care programmes is a ubiquitous one in health economics. since most health care systems in OECD countries have a large element of public provision, many of the goods and services they provide do not have market prices. Where markets in health care do exist, the prices generated are unlikely to provide reliable signals of the relative value of these goods and services to society, due to numerous market imperfections. Over the last fifteen years, the technique of cost-utility analysis has been developed as a new approach to the problem of valuing health care benefits. A distinctive feature of cost-utility analysis (CUA) lies in the fact that the outcomes of health care programmes are valued not in monetary terms but in terms of a new unit, the quality-adjusted-life-year (QALY), which embodies both the life-saving and the quality-of-life-improving dimensions of health care. The method of cost-utility analysis has two main elements: an analysis of the additional utilities (or quality-adjusted-life-years) generated by health care interventions, and an analysis of the costs entailed.