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Marginal costs and benefits

D J Torgerson¹, A Spencer

¹National Primary Care Research and Development Centre, University of York.

BMJ (Clinical Research Ed.)

|January 6, 1996

Summary

Decision makers should compare marginal costs and benefits, not averages, for new interventions. Marginal cost-effectiveness analysis provides a more accurate economic evaluation than average cost-effectiveness analysis.

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Area of Science:

Health Economics
Medical Decision Making
Public Health Policy

Background:

Decision makers frequently compare average costs and benefits of interventions.
Newer interventions are often compared to existing ones using average metrics.
This approach can lead to suboptimal resource allocation in healthcare.

Purpose of the Study:

To highlight the importance of marginal cost-effectiveness analysis over average cost-effectiveness analysis.
To demonstrate the difference in economic evaluation using a real-world example.
To advocate for the use of marginal analysis in healthcare decision-making.

Main Methods:

Reanalysis of cost-effectiveness data for Down's syndrome screening.
Comparison of average cost-effectiveness ratio (ACER) with marginal cost-effectiveness ratio (MCER).
Utilized data comparing biochemical screening versus age-based screening for Down's syndrome.

Main Results:

The marginal cost-effectiveness of biochemical screening for Down's syndrome was £47,786.
The average cost-effectiveness of the same screening was £37,591.
Marginal analysis yielded a different economic perspective compared to average analysis.

Conclusions:

Marginal cost-effectiveness analysis is the appropriate method for evaluating new interventions against existing ones.
Average cost-effectiveness can be misleading for policy and resource allocation decisions.
Calculating marginal costs and benefits, though potentially difficult, is crucial for accurate economic appraisal.

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