Cost-Saving Clinical Preventive Services
A health intervention is cost-saving when the
intervention is 1) effective and 2) costs less in the
long run than the cost of not intervening. For
example, the cost of vaccinating all children in a
given population against measles is less than the cost of treating the children who would
contract measles without the population-wide protection of immunization.
Cost-Effective Clinical Preventive Services
A medical intervention is considered cost-effective when the intervention provides a health
benefit at an acceptable cost. The term “acceptable cost” is not precisely defined and
involves important ethical considerations such as the value of a life. The answer to this
question boils down to a concept called “willingness-to-pay”: for example, how much is an
individual, an employer, or a society willing to pay to extend the life of one individual for
one year? Some conditions produce life- and work-altering disability, but not premature
death. Economists can use willingness-to-pay methods to assess the cost-effectiveness of
methods to prevent or modify disabilities as well. In the United States, there is no
universally accepted answer to the “willingness-to-pay” question and, thus, no universally
accepted threshold that distinguishes a cost-effective health intervention from an
intervention that is not cost-effective.
In order to compare and rank various preventive interventions, economists use costeffectiveness
(CE) ratios. A CE ratio is calculated as the ratio of differences in costs and
outcomes of the status quo and the proposed intervention according to the following
formula:
A CE ratio can be interpreted as the “price” of accepting a new intervention. The lower the
price, the more cost-effective the new intervention.
For more information on defining
the value of preventive services and
prioritizing services for inclusion in a
medical benefit plan, please refer to
Part IV: The Prioritization and
Strategic Implementation of Clinical
Preventive Service Benefits.
29
Cost-effectiveness ratio =
(Outcome with intervention – Outcome without intervention)
(Cost with intervention – Cost without intervention)
A health intervention is cost-saving when the
intervention is 1) effective and 2) costs less in the
long run than the cost of not intervening. For
example, the cost of vaccinating all children in a
given population against measles is less than the cost of treating the children who would
contract measles without the population-wide protection of immunization.
Cost-Effective Clinical Preventive Services
A medical intervention is considered cost-effective when the intervention provides a health
benefit at an acceptable cost. The term “acceptable cost” is not precisely defined and
involves important ethical considerations such as the value of a life. The answer to this
question boils down to a concept called “willingness-to-pay”: for example, how much is an
individual, an employer, or a society willing to pay to extend the life of one individual for
one year? Some conditions produce life- and work-altering disability, but not premature
death. Economists can use willingness-to-pay methods to assess the cost-effectiveness of
methods to prevent or modify disabilities as well. In the United States, there is no
universally accepted answer to the “willingness-to-pay” question and, thus, no universally
accepted threshold that distinguishes a cost-effective health intervention from an
intervention that is not cost-effective.
In order to compare and rank various preventive interventions, economists use costeffectiveness
(CE) ratios. A CE ratio is calculated as the ratio of differences in costs and
outcomes of the status quo and the proposed intervention according to the following
formula:
A CE ratio can be interpreted as the “price” of accepting a new intervention. The lower the
price, the more cost-effective the new intervention.
For more information on defining
the value of preventive services and
prioritizing services for inclusion in a
medical benefit plan, please refer to
Part IV: The Prioritization and
Strategic Implementation of Clinical
Preventive Service Benefits.
29
Cost-effectiveness ratio =
(Outcome with intervention – Outcome without intervention)
(Cost with intervention – Cost without intervention)
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