Question

1. Imagine the following 5 possible treatments with their costs and effectiveness measured in expected life...

1. Imagine the following 5 possible treatments with their costs and effectiveness measured in expected life extensions.

Treatment Costs Years

1

10 0.6
2 20 1.0
3 25 1.2
4 25 0.8
5 30 1.0

A) Plot all treatments and draw the Cost Effectiveness Frontier and describe what it shows.  

B) What is ICER for treatmet 2, as compared with, treatment 1? How would a policy maker use this cost effectiveness information by itself?

C) Imagine the value of life was 20 per year. What is the cost-beneficial treatment?

Homework Answers

Answer #1

a)

Cost effectivebess frontier shows that treatment 1,2 &3 lie on the frontier while treatment 4 & 5 are not on frontier. Treatment 4 has equivalent cost ot treatment 3 but has less years. Treatment 5 has same years like treatment 2 but less cost.

b)

ICER for treatment 2 = (Cost of treatment 2 - Cost of treatment 1) / (Years treatment 2 - years treatment 1)

=(20-10)/(1-0.6) = 10/0.4 = 25

Cost effectiveness information can help comparing two alternatives and select the best one.

c)

Treatment 1 is most cost beneficial treatment.

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