Cost Effectiveness Analysis

Cost benefit analyses in the health sector frequently deal with situations in which the money value of the benefits is either difficult or impossible to measure. This paper asserts that the use of cost effectiveness analysis as a means of escaping the need to place a dollar value on benefits does not escape the need for appropriately discounting these benefits when they accrue in different periods over time. The choice of an appropriate discount rate is discussed, and the benefits of elective hysterectomy are used to demonstrate that a serious bias can result from ignoring the need for discounting.