Compute the cost effectiveness of this program at a discount rate of 6%. Do you recommend implementation?
1) Define the program
Government is considering implementation of an anti-malaria program
- target 1,000 patients who currently have malaria, will be given a new medication for three years, which would maintain them free of malaria while they were taking it.
We assume no the alternative is: better than the government health system spending $50 per person per year to malaria with an older medication since those patients remain quite impaired about half as health as a person with no malaria.
Each medication costs $100 per person per year
- Will entirely recover their health
- 50 patients will experiece side effets which cost $400 per person to treat and lose 0.1 healthy-years in the first year and then responds to the medication and is malaria-free for the remaining years
2. Calculate net costs
Calculate gross costs
--Cost of vaccinations = 100,000
--Cost of treating reactions = 20,000
Gross costs = 120,000
Savings from not treating anti-malaria = $50,000
Net Costs = Gross Costs - Savings = $170,000
Calculate monetary savings due to the program
Net costs = gross costs– savings
Discount future flows to present value (recommended discount rate: 3% or 5%)
2) Calculate net health effects
Possible effects include:
Additional years in full health
Additional years with illness
Health improvement (without prolonging life)
Negative effects (inconvenience, side effects)
The estimation of effects can be based on previous studies, expert judgment, etc.
Sometimes studies combine mortality and other health effects into a single measure
E.g. disability-adjusted life years (DALYs)
3) Apply decision rules
Net health