BOOKS OF RtfiDIfGS - PAHO/WHO

- 368 -
Application of Cost-Benefit Analysis to Health Se~vlc /
sud billlnS, the evaluation of compuler performance is straightforward. Docs it r~edu
costs? If o, by how much?
Medical Sa~ice Even when the computer helps in diagnosis the test is still coet
reduction, if an older way of performing the same task is being replaced. There may be a
complication, however. The cost of operating the computer falls on the hospital, whil
savings in physician time accrue to the attending physician. The presence of distributional
considerations suggests that the decision reached is not independent of who the decision
maker is, or who exerts predominant influence on hia.
Apart from the distributional considerations of who pays and who saves, evaluation of
the worthwhileness of the computer in assisting in diagnosis is no different from the way
another ancillary medical service, the laboratory, is evaluated. With respect to services
that were rendered in the past, the test is simple. Does the new equipment save money or
does it expand services for the same amount of money? In the laboratory additional and
more costly equipment does replace technical personnel. A possible offset is the tendency
to prescribe more services (95), although within the limits of existing capacity of
equipment and staff the marginal cost of additional units of service is low. What is not
known is how much good is accomplished, particularly in the absence of information on
the timeliness of delivery of the reports on these services.
Flagle (93) has reported economies achieved in patient surveillance due to continuity
of use of the monitoring system in infusing blood. This finding strikes me as analogous to
the finding in his early work (96) that a single channel is more efficient than two channels
when the demand for services vanes stochastically.
The intensive care unit is a more complex operation to evaluate. To the extent that it
substitutes equipment for nurses it should cost less. However, the unit is also intended to
save lives. The yield in life-years gained is properly subject to more sophisticated analysis.
From this discussion it appears that cost-benefit or cost-effectiveness analysis is a
plausible approach only if the service rendered is a new one or if the old product has
changed appreciably, gaining new dimensions. When all benefits take the form of savings
in health resources, that is, are direct and tangible benefits, the appropriate form of
analysis is cost-benefit. When the preponderant benefits are intangible or life-saving, the
dilemma is to choose between cost-benefit and cost-effectiveness analysis. On the one
hand, cost-effectiveness analysis is easier to perform, since intangible benefits need only
be measured but not valued. Indeed, according to Feldstein (97), even the problem of
choice of discount rate is simpler in the case of cost-effectiveness analysis, with only the
social time preference rate being relevant. On the other hand, to resort to
cost-effectiveness analysis is to give up in advance whatever help analysis can offer in
choosing among several objectives or program areas. It then becomes necessary to malke
the choice among programs on other grounds, as the Gottschalk Committee did.
1 am unable to discern a general resolution to this dilemma. It is certainly not evident
how to establish priorities in a systematic way when cost-benefit analysis is abandoned.
Perhaps the choice can still be made in a practicable way, with reasons explicitly stated,
when remarkable benefits are under consideration, as in the treatment of end-stage
kidney disease. When the benefits in question are modest but difficult to value, how is
one to decide whether or not to adopt a particular piece of technology? To follow the
lead of pace-setting organizations is almost always to say yes. Perhaps we should put trust
in our ability to continue to improve the valuation of intangible bnefits in the
future (28). Setting standard values on gains in life expectancy at various ages would