Question

2. Consider a health policy that aims to reduce obesity in society and thereby reduce the rate of cardiac disease in 20 years’ time. Discuss the issues associated with conducting a cost-benefit analysis into this policy proposal. Your answer should include discussion of quantifying benefits and costs as well as other technical issues that would need to be dealt with.

Answer 1

The Cost-benefit Analysis(CBA) is one of the methods of evaluation of health interventions, others being Cost-effectiveness analysis, cost-utility analysis and cost-consequence analysis.

The CBA compares the Total cost of the intervention and Total Benefits of the intervention and if TB>TC, the policy is acceptable. It TC>TB, the intervention is inefficient.

It has been most popular and useful method of economic valuation of policy intervention. But, there are problems associated with performing a Cost Benefit Analysis. These include -

1. Issues in assessing Costs and Benefits - The biggest problem with CBA is that it requires all costs and benefits in monetary terms for comparison. Costs are relatively easier to estimate as they are usually in monetary terms. But benefits of health benefits are not mentioned in monetary terms. Thus, there arises difficulties in assessing total costs and benefits.

Also, determining which costs, benefits, outcomes and effects to be included in the CBA analysis, can be controversial. In practice, the included costs and benefits are limited to those that can be measured, which has potential to make decision-making biased.

It is very difficult to remove the problem of CBA.

2. Costly and time consuming : Trying to assess all the costs and benefits of a policy can be very difficult and thus, time consuming. This increases the cost of performing such an analysis.

3. Selection of Discounting Factor : When the costs and benefits in future are assessed, it becomes important to consider the Present Value of the intervention. In determining the value, a discount rate must be chosen. There arises conflict in determining this rate.