Abstract
This paper compares the implementation of the two economic evaluation methods Cost-Effectiveness/Utility (CEA/CUA) and Cost-Benefit Analysis (CBA) as tools for allocation of national public funds in the health and transport sector in Sweden, respectively. We compare the recommended values for important economic parameters such as the social discount rate, the marginal cost of public funds, and the explicit and implicit valuation of health, and document a number of substantial and unexplained differences in implementation. Such differences are problematic considering that the increasing use of economic evaluations to guide policy decisions also has implied an overlap of application areas. We conclude with a discussion on the need of a harmonized procedure for economic evaluations in the public sector in order to reduce the risk of inefficient allocations purely due to different applications of the methods. Published: Online February 2017. In print December 2017.
Highlights
Different types of economic evaluation methods are used to guide public policy decision making on how to allocate scarce public funds to competing investments
We have described, discussed and compared Cost-Benefit Analysis (CBA) and CEA methods as they are used by two Swedish government authorities
The range of policy fields and government agencies that make use of CBA and CEA has widened during the last ten years, and the role given to economic evaluations has increased in some fields
Summary
Different types of economic evaluation methods are used to guide public policy decision making on how to allocate scarce public funds to competing investments. Under an assumption of a fixed budget and using a health-care perspective the threshold value (λ) should be based on the value (“cost per QALY”) of current services that are displaced when introducing a new cost-increasing intervention. This is e.g. the approach in the UK in the work by the National Institute of Clinical Excellence (NICE). Under a flexible budget assumption and societal evaluation perspective, as e.g. in the Swedish recommendations of CEA (TLV 2003), the threshold value (λ) should rather instead be based on the societal willingness to pay for the outcome (e.g. QALY) (Baker et al 2011). Section four compares some frequently used economic parameters, while section five concludes the paper with a discussion
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