Non-linearity in the cost-effectiveness frontier

Conventional cost‐effectiveness decision rules rely on the assumptions that all health care programmes are divisible and exhibit constant returns to scale for a homogeneous population; hence, the path between adjacent programmes on a cost‐effectiveness frontier must be linear. In this paper we build...

Full description

Saved in:
Bibliographic Details
Published in:Health economics 2006-06, Vol.15 (6), p.565-577
Main Authors: Lord, Joanne, Laking, George, Fischer, Alastair
Format: Article
Language:English
Subjects:
Comparative analysis
Cost analysis
Cost effective analysis
Cost-Benefit Analysis - statistics & numerical data
cost-effectiveness analysis
Decision making
decision rules
Delivery of Health Care - economics
Delivery of Health Care - organization & administration
Economic models
Economies of scale
Effectiveness studies
expansion path
Health care
Health economics
Humans
Models, Econometric
non-linearity
Nonlinear models
Resource Allocation
State Medicine
United Kingdom
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Conventional cost‐effectiveness decision rules rely on the assumptions that all health care programmes are divisible and exhibit constant returns to scale for a homogeneous population; hence, the path between adjacent programmes on a cost‐effectiveness frontier must be linear. In this paper we build a framework to analyse non‐linear ‘expansion’ paths. We model the impact of two key sources of non‐linearity: economies of scale or scope in the production of health care; and prioritisation of patients who are most likely to benefit from more expensive and more effective treatments. We conclude that the expansion path might be linear, convex or concave, depending on the situation. The path might also exhibit vertical discontinuity due to fixed costs or horizontal discontinuity due to indivisibility. The efficiency of resource allocation might be improved by empirical estimation of expansion paths. We discuss the advantages and disadvantages of this approach compared with a standard stratified analysis. Copyright © 2006 John Wiley & Sons, Ltd.
ISSN:1057-9230
1099-1050
DOI:10.1002/hec.1083