Extended Cost Effectiveness Analysis

Most people know what cost-effectiveness analysis (CEA), but what is extended cost effectiveness analysis (ECEA)?  A paper by Verguet, Laxminarayan,and Jamison (2014) describes the ECEA approach as it relates to the benefits of universal public finance (UPF) of specific medical treatments.  CEA measures the effectiveness of a treatment relative to its cost.  ECEA does this as well but also includes that value of UPF based on its value providing provide insurance against financial risks. Since most people are risk averse, insurance is useful in and of itself.  Second, ECEA also accounts the financial implications of crowding out private expenditures; namely, in the case of UPF that funding coverage (e.g., through taxes) creates deadweight loses.  Finally, ECEA can incorporate values society places on more or less equal distributional of resources across wealth strata of a population.

The authors apply the ECEA framework to determine the value of universal public finance (UPF) of tuberculosis (TB) treatment.  Their analysis concluded that “replacement of private finance for TB treatment in India with UPF could lead to both substantial health gains and financial risk protection bets, both concentrated among the poor.”


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