Cost-Effectiveness Analysis for Policy

Cost-effectiveness analysis (CEA) is an economic evaluation that compares competing policies or programs by their cost relative to a single, common measure of effect — lives saved, cases averted, years of education gained, or quality-adjusted life years (QALYs). Rather than valuing outcomes in money, CEA expresses results as an incremental cost-effectiveness ratio (ICER): the extra cost of one option per extra unit of outcome it delivers compared with the next-best alternative. Codified in standard references such as Drummond and colleagues' Methods for the Economic Evaluation of Health Care Programmes and the US Panel's Cost-Effectiveness in Health and Medicine, CEA is the dominant appraisal tool for health and increasingly for other public programs with a shared outcome metric.