Question

EPA is considering four alternatives to improve the safety of drinking water. In evaluating their program they have estimated costs and the number of QALYs saved under each alternative as shown in this table:

Alternative	cost (millions)	QALY's Saved	Inc Cost	Inc Eff
1	45	725	45	725
2	225	1550	180	825
3	300	2450	75	900
4	475	3375	175	925

a. What are the incremental costs of these alternatives? Which is the most cost-effective option?

Answer 1

ncremental cost effective analysis

Incremental cost effective ratio(ICER) is the ratio of incremental costs to quality adjusted life years saved.

Incremental cost effective ratio=C1-C0/E1-E0

Where c1-co is incremental costs and E1-Eo is incremental effectiveness

Alternative 1

Incremental cost effective ratio=C1-C0/E1-E0

                                                           =45/725

                                                           =6.21%

Alternative 2

Incremental cost effective ratio(over alternative 1)=C2-C1/E2-E1

                                                           =225-40/(1550-725 )

                                                           =180/825

                                                           =21.82%

Alternative 3

Incremental cost effective ratio(over alternative 2)=C3-C2/E3-E2

                                                           =300-225/(2450-1550)

                                                           =75/900

                                                         =8.33%

Alternative 4

Incremental cost effective ratio(over alternative 3)=C4-C3/E4-E3

                                                           =475-300/(3375-2450)

                                                 =175/925

                                                           =18.92%

ICER ratio is less for alternative 1.So alternative 1 is most cost effective option