Box 3.1A Consistent Basis for Calculating Cost-Effectiveness in DCP2

Units for Cost-Effectiveness Ratios

The editors of DCP2 asked the authors of the individual chapters to adopt a common method of cost-effectiveness analysis and to use consistent parameters. Authors were instructed to calculate cost-effectiveness in terms of U.S. dollars per DALY, where DALYs were calculated using disability weights provided by WHO and a 3 percent discount rate.

No Differentiation by Age

Unlike some studies, the editors of DCP2 chose not to apply different weights by age. So, for example, the effect of saving an infant life counts for more than saving the life of an older person because of the difference in expected years of life, but not as the result of valuing a year of life saved at one age as higher or lower than a year of life saved at another age.

Basis for Calculating Years of Life

The calculations of expected years of life were based on regional average life expectancies at each age. This has the effect of reducing the cost-effectiveness of interventions in regions with lower life expectancy; however, within any region, this allows for a more realistic comparison of interventions that affect children and those that affect adults.

Currency Units

The main alternatives for measuring costs are to convert all currencies into a widely accepted currency such as U.S. dollars using market exchange rates or to convert them into international dollars by using a conversion factor based on purchasing power parity. The principal advantage of using international dollars is that they adjust for the real difference in purchasing power between one currency and another. However, DCP2 elected to use U.S. dollars because they are more consistent with other cost estimates that are familiar to policy makers, and because available purchasing power indexes are based on aggregating a full spectrum of prices, and may therefore be misleading if used to analyze a specific sector with its own composition of tradable and nontradable goods. International dollars are harder to understand and do not correspond to financial feasibility as reflected in budgets.

Costs

DCP2 counts the costs of producing an intervention but not the costs of consuming it on the part of patients and their families. Indirect costs are often not monetary, especially the costs of people's time, and are hard to estimate consistently. When such costs are high, they make interventions appear not to be cost-effective, but the problem may lie with where facilities are sited and how they are staffed and operated rather than with the interventions they offer.

Source: Adapted from DCP2, chapter 15.

From: Chapter 3, Cost-Effectiveness Analysis

Cover of Priorities in Health
Priorities in Health.
Jamison DT, Breman JG, Measham AR, et al., editors.
Copyright © 2006, The International Bank for Reconstruction and Development/The World Bank Group.

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