Cost-Benefit Methodology in Medical Care

Comments on Three Papers Prepared for the Annual Meeting of the Robert Wood Johnson Clinical Scholars

by Joseph P. Newhouse

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Cost-benefit studies now measure the benefits of medical intervention as the utility a well-informed consumer receives, and this can be represented by the amount the consumer would be willing to pay for the intervention. This is in contrast to earlier studies in which cost benefits were measured by change in a discounted stream of earnings caused by medical intervention. However, the pendulum may have swung too far; the author argues that it is important to be clear why one is interested in costs — to make the most of society's scarce resources. Three papers, on tomography, X-ray for lower back pain, and rheumatoid arthritis, are discussed to illustrate cost-benefit analysis and decision theory. The author cautions against too much emphasis on cost without taking into account other values and benefits. It is important to be broad in the definition of benefits; anything of potential value to the informed consumer is fair game.

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