Issues in Cost Effectiveness in Health Care

Abstract

Cost-effectiveness analysis (CEA) is becoming increasingly popular as society moves toward rationalizing health costs. This review describes the applications and limitations of the technique. Conceptually simple though frequently complicated in application, CEA compares the cost of a procedure with its effectiveness, thus helping an administrator to judge whether the procedure is worth its cost. CEA also permits comparison of various interventions that result in a similar health outcome. A major benefit of CEA is that it forces decision makers to confront the tradeoffs implicit in all decisions regarding alternative approaches. Limitations of the CEA philosophy and technique also have to be understood if it is to be employed effectively; it is not an assessment of cost savings, nor is it a decision-making technique because it does not incorporate value judgments. A number of potential applications to dentistry are described.