Overview of CBA and CEA Methods

Abstract

Cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA) are formal analytic techniques for comparing the positive and negative consequences of alternative uses of resources. Both CBA and CEA require the identification, quantification, and comparison of all significant consequences—health effects and resource costs—of health care interventions. CBA and CEA differ in the quantification or valuation of the demonstrated health effects. CBA requires that health effects (benefits) be valued in the same unit as costs, namely dollars. CEA values benefits in “health effects” units—lives saved, years of life saved, days of disability avoided. This difference in benefit measurement leads to differences in the nature of the comparisons that can be made and the types of decisions that can be informed by the two analytic techniques.

While CBA and CEA have limitations, their value as information-generating techniques that aid decision making should not be underestimated.