[Cost effectiveness and health sector reform]

The cost-effectiveness of a health intervention is an estimate of the relation between what it costs to be provided, and the improvement in health which results from such intervention. Health may improve because the incidence of illness or injury is reduced, because death is avoided or delayed, or because the duration or severity of disability is limited. The calculation of this health benefit combines objective factors, such as the age at incidence and whether or not the outcome is death, with subjective factors such as the severity of disability, the judgement as to the value of life lived at different ages, and the rate at which the future is discounted. The construction and interpretation of the estimate are explained. Also, the paper examines whether the concept of cost-effectiveness is consistent with ethical norms such as equity, and concludes that they are not in conflict. Finally, it addresses the question of how to incorporate cost-effectiveness into a health sector reform, and possible ways to implement it.