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Cost Minimization vs. Cost-Effectiveness Analyses Report (Assessment)


Types of Cost Analysis: Comparison

Type of Analysis Measurement of Consequences
Cost-minimization analysis It is used to assess the differences in costs between similar interventions. This tool provides a partial economic analysis because it does not take into account the consequences of interventions. However, in terms of calculating the initial expenditures, cost-minimization analysis can become a useful part of the decision-making process as it helps identify the cheapest option (World Health Organization [WHO], 2017).
Cost-effectiveness analysis It is meant to analyze several interventions/projects that have the same goal (e.g., reduced blood pressure in patients, lower mortality rates, etc.). A distinctive feature of this method is that the expected results are expressed in unified natural units. The economic effects of an intervention increase when the cost-effectiveness ratio decreases and the coefficient “effect per unit of costs” increases (WHO, 2017).
Cost-utility analysis The tool helps measure intervention consequences in a monetary form. By using this method, it is possible to directly compare incremental costs with incremental intervention results, which are expressed in any type of financial units, e.g., US dollars. Moreover, it is possible to analyze interventions aimed at achieving qualitatively different results. For example, one may evaluate projects aimed at reducing mortality from the disease, improving the quality of life, increasing the percentage of successful surgical operations, etc. (Jakubiak-Lasocka & Jakubczyk, 2014).
Cost-benefit analysis Within the given framework, the results are evaluated in quality-adjusted life years (QALY) and/or disability-adjusted life years (DALY). This analytical tool can be regarded as a special form of cost-effectiveness analysis. However, compared to it, the cost-utility analysis provides opportunities to examine different projects aimed to increase the quality of life and longevity. This advantage is especially important when it is necessary to choose one of several alternatives due to financial constraints (WHO, 2017).

Cost Minimization vs. Cost-Effectiveness Analyses

The major advantage of cost-minimization analysis is that it helps conduct a comprehensive assessment of all possible direct and indirect costs associated with an intended intervention. The analysis may thus show how much money one should spend on the realization of a project and what costs it will induce in the long run. However, in reality, even those interventions which seem expensive at first may turn out to be more cost-efficient when both expenses and possible benefits are taken into account. The cost-minimization analysis does not consider this factor, which may be regarded as a significant disadvantage. Moreover, it is useful only for the comparison of equivalent interventions (WHO, 2017).

Cost-effectiveness analysis is recognized as an approach with a high explanatory power during the assessment of any intervention. It is one of the most universal and attractive types of project analysis from a practical point of view.

The main advantage of this tool is that it is based on a fairly simple idea and the results obtained by using it can be easily interpreted. Nevertheless, the utilization of a simple cost-effectiveness analysis can lead to biased results when the function of performance depends on costs nonlinearly. Other key limitations of the method include the complexity of calculating the time-allocated costs and effects, the difficulty in eliminating the influence of external effects on the obtained results, and a high degree of result sensitivity to the selection of an indicator characterizing an intervention effect, etc. (Jakubiak-Lasocka & Jakubczyk, 2014). These limitations should always be considered and addressed via appropriate statistical instruments.

References

Jakubiak-Lasocka, J., & Jakubczyk, M. (2014). Cost-effectiveness versus cost-utility analyses: What are the motives behind using each and how do their results differ?—A Polish example. Value in Health Regional Issues, 4, 66-74.

World Health Organization. (2017). Introduction to drug utilization research. Web.

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IvyPanda. "Cost Minimization vs. Cost-Effectiveness Analyses." October 23, 2020. https://ivypanda.com/essays/cost-minimization-vs-cost-effectiveness-analyses/.

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IvyPanda. 2020. "Cost Minimization vs. Cost-Effectiveness Analyses." October 23, 2020. https://ivypanda.com/essays/cost-minimization-vs-cost-effectiveness-analyses/.

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IvyPanda. (2020) 'Cost Minimization vs. Cost-Effectiveness Analyses'. 23 October.

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