Question

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?

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	Costs	Years	Value (Years * 20)	Benefit (Value- Costs)
1	10	0.6	12	2
2	20	1	20	0
3	25	1.2	24	-1
4	25	0.8	16	-9
5	30	1	20	-10

Treatment 1 is most cost beneficial treatment.