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.
Labelle
R J
RJ
McMaster University, Hamilton, Ont., Canada.
Hurley
J E
JE
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