Question

how does cost benefit analysis differ from cost effectiveness analysis? why has cost effectiveness analysis become the method of choice in health economists around the world

Answer 1

First of all, we have to we have to understand the difference between Cost Benefit Analysis and Cost Effectiveness Analysis.

Cost Benefit Analysis

                Here we will discuss about Cost Benefit Analysis or say CBA, this method is most popular and appropriate method of evaluating projects from the point of view from society. It helps the government or authorized bodies to continue with the project or to scrap the project, such as for ex. Flyover, bypass, metro, dam and so on. In this method it actually provides the power of decision making to the respected authority.. It generally includes the processes of identification, comparison, measurement and evaluation for the cost and benefits to the society.

In this process it implies the benefits against the cost involved for the projects. If the benefits are more to the cost of the project it should be continued. And if the benefits are lower than the cost of the project the project should be discarded or scrapped.

                                                Cost Effectiveness Analysis

                Here we are discussing about the Cost Effectiveness Analysis or say CEA, Like Cost Benefit Analysis the Cost Effectiveness Analysis considers the output produced by the particular project, and these outputs are not measured in the monetary terms, these are measured in the effectiveness of the project. For ex. A flyover builds in the particular area and it starts operating and produces more pollution in that particular area and causes the more health effects on the society in that particular flyover area. The more serious problems are reported from the society like lung diseases, respiratory dysfunction, eye and throat irritation and so on. And in health economics the health care researchers are often uses cost effectiveness analysis to measure the cost of health care interventions for ex. Lives saved or diseases cured, health improvements and so on.

In between of these two analysis, the Cost Effectiveness Analysis is always preferred over the Cost Benefit Analysis. And it is very simple to calculate the effectiveness of the particular project.