Implications of basing health-care resource allocations on cost-utility analysis in the presence of externalities.
Cost-utility analysis is increasingly being advocated as a tool for helping to establish funding priorities among programs and services in the health-care sector. As currently conducted, however, cost-utility analysis is problematic as a basis for achieving allocative efficiency because it excludes externalities. The exclusion of externalities may bias program ranking in unpredictable ways, leading to a non-optimal allocation of resources. Consideration of externalities also raises a number of distributional issues for the evaluation of health services and highlights the important of developing economic evaluation methods that are consistent with the conceptual basis for allocating resources.
McMaster University, Hamilton, Ont., Canada.
R J
RJ
Labelle
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JE
Hurley
D002170:Canada; D003362:Cost-Benefit Analysis / Q000379:methods* / Q000706:statistics & numerical data; D003659:Decision Making, Organizational; D017048:Health Care Costs; D015276:Health Care Rationing / Q000191:economics* / Q000458:organization & administration; D006292:Health Priorities / Q000191:economics; D006302:Health Services Research; D017059:Models, Econometric; D017063:Outcome Assessment, Health Care / Q000191:economics* / Q000458:organization & administration; D011788:Quality of Life; D026712:Value of Life