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CESifo Economic Studies Advance Access published online on August 12, 2006
CESifo Economic Studies, doi:10.1093/cesifo/ifl011
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© The Author 2006. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Original Papers

Cost-Effectiveness Analysis in the Health Sector when There is a Private Alternative to Public Treatment

Michael Hoel *

* To whom correspondence should be addressed.
Michael Hoel, E-mail: mihoel{at}econ.uio.no


  Abstract

In health economics, cost-effectiveness is defined as maximized health benefits for a given health budget. When there is a private alternative to public treatments, care must be taken when using cost-effectiveness analysis to decide what types of treatments should be included in the public program. The correct benefit measure is in this case the sum of health benefits to those who would not be treated without the public alternative and the cost savings to those who would otherwise choose private treatment. In the socially optimal ranking of treatments to be included in the public health program, treatments should be given higher priority the higher are costs per treatment for a given ratio of gross heath benefits to costs. (JEL: H42, H51, I18)


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