Question

1. What is the present value of the cost of the surgery and follow-up treatment? What is the cost per QALY for the surgery?

Liver failure significantly reduces the quality of life for sufferers. Government surveys indicate that patients with liver failure are equally happy living five years completely healthy or ten years with the disease. After a transplant, patients recover to 80% of full health. With a successful liver transplant, patients will live 4 years. Without the transplant, the patient will live two years. The cost of the transplant is $100,000 immediately. Each year the patient must take auto-immune suppressants that cost $10,000 to stop the body from rejecting the transplant. Regardless, 15% of patients do not have a successful surgery and die during the transplant. Use a discount rate of 5% throughout.

Answer 1

The present value can be found out by the following formula

= Cash flow at perod 1

rate of return

number of periods

²³⁴

The present value is $

The cost of the surgery is $