Question 1

A cost effectiveness study evaluates whether or not the benefits from inserting a drug eluting coronary stent add enough years of life expectancy to justify the cost; a cost-benefit study evaluates whether a drug eluting coronary stent, a beta blocker drug or cardiac bypass surgery might provide the most additional years of life expectancy per dollar spent.

Accepted Answer

A cost-benefit study evaluates whether or not the benefits from inserting a drug eluting coronary stent add enough years of life expectancy to justify the cost; a cost effectiveness study evaluates whether a drug eluting coronary stent, a beta blocker drug or cardiac bypass surgery might provide the most additional years of life expectancy per dollar spent.

Question 2

Choices based on marginal, rather than average, benefits and costs will tend to overproduce medical services.

Accepted Answer

Choices based on average, rather than marginal, benefits and costs will overproduce medical services.

Question 3

Cost-benefit analysis of a childhood immunization program is straight-forward analysis because the costs of the drugs are well known and the benefits to individual children are easy to calculate.

Accepted Answer

Costs of the drug may be straight forward; however, the benefits - avoiding the cost to society for children who do not get the vaccine and cause an outbreak in the rest of the population - may be more difficult to quantify.

Question 4

Cost-effectiveness analysis is a limiting case of the general cost-benefit analysis.

Accepted Answer

Cost-effectiveness analysis is a specific type of cost-benefit analysis that compares the relative costs and outcomes (effects) of different courses of action, but does not assign a monetary value to the outcome, making it a limiting or more focused case of the broader cost-benefit analysis framework.

Question 5

In the hypothetical example that follows, patients coming into a clinic with disease symptoms are classified as having varying degrees of severity, from Stage 0 to Stage 4. Stage 4 represents the most severe symptoms; Stage 0 includes those with symptoms only but not the disease. The available treatment is expected to benefit those groups differently, and add extra years of life to each person as shown in the Gain (each person) row in the table. Please answer questions 5 through 7. 
? $\begin{array}{|l|l|l|l|l|l|l|}
\hline &  \text {Stage 4 }&  \text {Stage 3} & \text { Stage 2} &  \text {Stage 1 }&  \text {Stage 0 }& \quad\
\hline \text { Gain (each person) }& 45 & 30 & 4 & 1 & 0 & \
\hline  \text {Number of persons coming to clinic }& 4 & 4 & 12 & 20 & 60 & \
\hline
\end{array}$

-Marginal analysis shows that more than 80% of the total gains are realized by treating only the sickest patients, Stage 4 and Stage 3 patients.

Accepted Answer

First, calculate the total life years gained for each group by multiplying gain per person by the number of people in that group. See the last row in the table below for detailed calculations. Second, sum up the results to obtain the cumulative total of 368 life years gained by 100 people. See the last column in the table. Third, calculate the gain for the sickest patients only, by totaling the life years gained by Stage 4 and Stage 3 patients: 180 + 120 = 300. Since 300/368 = 81.5%, this statement is true.
? 11ee6803_194d_70ee_8bc5_53f2688c68a8_TB10141_00

Question 6

In the hypothetical example that follows, patients coming into a clinic with disease symptoms are classified as having varying degrees of severity, from Stage 0 to Stage 4. Stage 4 represents the most severe symptoms; Stage 0 includes those with symptoms only but not the disease. The available treatment is expected to benefit those groups differently, and add extra years of life to each person as shown in the Gain (each person) row in the table. Please answer questions 5 through 7. 
? $\begin{array}{|l|l|l|l|l|l|l|}
\hline &  \text {Stage 4 }&  \text {Stage 3} & \text { Stage 2} &  \text {Stage 1 }&  \text {Stage 0 }& \quad\
\hline \text { Gain (each person) }& 45 & 30 & 4 & 1 & 0 & \
\hline  \text {Number of persons coming to clinic }& 4 & 4 & 12 & 20 & 60 & \
\hline
\end{array}$

-Assuming that the clinic treats first those patients who are sickest and stand to benefit most, the total benefits obtained by treating more and more patients can be displayed graphically, where the total benefits line eventually flattens out. This is often called "flat of the curve" medicine.

Accepted Answer

The "flat of the curve" medicine concept refers to the point at which additional medical interventions provide diminishing returns in health outcomes. In this scenario, as patients with less severe stages of the disease (who gain less from treatment) are treated, the total benefits increase at a decreasing rate, eventually flattening out as those with no gain from treatment (Stage 0) are reached.

Question 7

In the hypothetical example that follows, patients coming into a clinic with disease symptoms are classified as having varying degrees of severity, from Stage 0 to Stage 4. Stage 4 represents the most severe symptoms; Stage 0 includes those with symptoms only but not the disease. The available treatment is expected to benefit those groups differently, and add extra years of life to each person as shown in the Gain (each person) row in the table. Please answer questions 5 through 7. 
? $\begin{array}{|l|l|l|l|l|l|l|}
\hline &  \text {Stage 4 }&  \text {Stage 3} & \text { Stage 2} &  \text {Stage 1 }&  \text {Stage 0 }& \quad\
\hline \text { Gain (each person) }& 45 & 30 & 4 & 1 & 0 & \
\hline  \text {Number of persons coming to clinic }& 4 & 4 & 12 & 20 & 60 & \
\hline
\end{array}$

-"Flat of the curve" medicine means that if patients with Stage 0 disease symptoms are treated, the marginal benefits of the treatment are less than the marginal cost of treating symptoms.

Accepted Answer

The concept of "Flat of the curve" medicine emphasizes how small marginal benefits become when a useful treatment is extended to too many patients. The concept does not refer to marginal cost at all.

Question 8

Physicians generally focus on tradeoffs. Health care economists focus on maximizing benefits to society as a whole.

Accepted Answer

The answer of Physicians generally focus on tradeoffs. Health care...

Question 9

The estimate of the value of benefits expected from a treatment depends on the viewpoint of the party benefitting from that treatment.

Accepted Answer

Cost-benefit analysis must include the viewpoint of the analysis. At least three different parties benefit from a medical treatment: the patient, the payer, and the physician. Society as a whole may also benefit. Each party generally receives different payoffs over different time frames.

Question 10

Many useful medical technologies become wasteful when they are expanded to include low-risk individuals.

Accepted Answer

Since resources are scarce, it is important to target treatment toward those most in need, as they stand to benefit the most from the treatment.

Question 11

A problem with Cost-Benefit Analysis is that
A) scientists observe people's behavior to calculate how much individuals are willing to pay for a particular treatment.
B) opportunity cost is measured as the value of the next best alternative foregone.
C) the perspective of the one benefitting from the medical service must be included.
D) sometimes subtle distinctions in the alternatives considered as opportunity costs may overstate the benefits of a treatment.
E) the use of expected values employs the statistical law of large numbers and this is not acceptable for individual decision making analysis.

Accepted Answer

Sometimes subtle distinctions in the alternatives considered as opportunity costs may overstate the benefits of a treatment, leading to inaccurate conclusions in cost-benefit analysis.

Question 12

A kidney cancer drug delays cancer progression for six months, with no known side effects. An estimated treatment cost is $54,000. What is the cost per Quality Adjusted Life Year (QALY)?
A) $54,000.
B) $27,000.
C) $13,500.
D) $108,000.
E) $67,500.

Accepted Answer

The drug delays cancer progression for six months, which is equivalent to 0.5 QALY. The cost of the treatment is $54,000, so the cost per QALY is $54,000 / 0.5 = $108,000.

Question 13

One of the weak points in the Jones-Lee Approach to estimating Value of Life is that
A) scientists really cannot make an acceptable estimate of the risk of death.
B) the value of time for a group of individuals varies enormously, and the Jones-Lee Approach makes no provision for this.
C) the mean value of time used in the calculation for a group of individuals demeans the value of those who do not work, such as the elderly, children or those in institutions.
D) selection bias. The method only measures the actions of those who undertake a risky action.
E) even for life itself, people will buy less as the price increases.

Accepted Answer

The answer of One of the weak points in the...

Question 14

The primary costs to be accounted for in health care projects include all of the following except:
A) Medical care, follow-up and administration.
B) Treatment damages (side effects).
C) Reductions in future medical costs.
D) Time and pain of patient and family.
E) Provider time and inconvenience.

Accepted Answer

Option (c) represents benefits rather than costs.

Question 15

It has been observed that some people are willing to accept a more dangerous job for a higher salary. If a study estimates that for each .01% increase in risk of death, an additional $360 in annual salary was observed, the estimated value of life is
A) $36 million.
B) $3.6 million.
C) $360,000.
D) $ 36,000.
E) $ 3,600.

Accepted Answer

$360 ÷ 0.0001 = $3.6 million

Question 16

Consider a hypothetical example in which a patient has a condition in which she can expect to live only 2 more years on medications, with her quality of life reduced to 50% during those 2 years. With successful surgery as an alternative, she can expect instead to live 3 years with a better quality of life, 90%. Surgical mortality rate is 1% and the surgery is successful half the time. Using a 5% time discount rate, a student in health economics class correctly sets up the analysis.
‪ 
-If the patient decides to have the surgery (compared to the baseline option of taking medications instead), the quality adjusted life expectancy (number of QALYs) after accounting for both probability of success and surgical mortality is
A) 2.58.
B) 1.77.
C) 0.98.
D) 0.79.
E) 0.48.

Accepted Answer

The quality adjusted life expectancy with surgery is the probability weighted sum of (a), (b) and (c).
0.01 x 0.00 + 0.49 x 0.98 + 0.50 x (0.90 + 0.86 + 0.82) = 1.77

Question 17

Consider a hypothetical example in which a patient has a condition in which she can expect to live only 2 more years on medications, with her quality of life reduced to 50% during those 2 years. With successful surgery as an alternative, she can expect instead to live 3 years with a better quality of life, 90%. Surgical mortality rate is 1% and the surgery is successful half the time. Using a 5% time discount rate, a student in health economics class correctly sets up the analysis.
‪ 
-If the patient decides to have the surgery, the net gain in discounted QALYs with surgery (compared to the baseline option of taking medications instead) is
A) 2.58.
B) 1.77.
C) 0.98.
D) 0.79
E) 0.48.

Accepted Answer

1.77 - 0.98 = 0.79

Question 18

Consider a hypothetical example in which a patient has a condition in which she can expect to live only 2 more years on medications, with her quality of life reduced to 50% during those 2 years. With successful surgery as an alternative, she can expect instead to live 3 years with a better quality of life, 90%. Surgical mortality rate is 1% and the surgery is successful half the time. Using a 5% time discount rate, a student in health economics class correctly sets up the analysis.
‪ 
-If the surgery costs $20,000, the cost per QALY gained is
A) $20,000.
B) less than $20,000.
C) more than $20,000, but less than $25,000.
D) more than $25,000, but less than $30,000.
E) $12,470.

Accepted Answer

Response:
Cost of surgery $20,000
Expected net QALY gain 0.79 QALYs
Cost per QALY gained $25,316 ($20,000/.79)

Question 19

Consider a hypothetical example in which a patient has a condition in which she can expect to live only 2 more years on medications, with her quality of life reduced to 50% during those 2 years. With successful surgery as an alternative, she can expect instead to live 3 years with a better quality of life, 90%. Surgical mortality rate is 1% and the surgery is successful half the time. Using a 5% time discount rate, a student in health economics class correctly sets up the analysis.
‪ 
-If you calculate the cost per QALY using a discount rate of 3%,
A) you will get a higher cost per QALY.
B) you will get a lower cost per QALY.
C) you will get the same cost per QALY.
D) it will cost less to perform the operation.
E) it will cost more to perform the operation.

Accepted Answer

The answer of Consider a hypothetical example in which a...

Question 20

A U.S. emergency relief agency is considering sending a team of experts to another country to treat a severely contagious disease outbreak. Each team member is paid $10,000 for this one-week-long job. The agency estimates effectiveness as follows:
? $\begin{array}{|l|l|}
\hline   \text { Number of Team Members }&  \text {  Number of Deaths }\
\hline 0 & 1,000 \
\hline 5 & 400 \
\hline 10 & 150 \
\hline 15 & 30 \
\hline 20 & 30 \
\hline
\end{array}$
-If the Agency is considering sending a team of 15 members vs. a team of 10 members, how many additional lives would the larger team be able to save?
A) 600
B) 250
C) 150
D) 120
E) 30

Accepted Answer

11ee6803_194e_f791_8bc5_81019c4df291_TB10141_00

Quiz 3: Cost-Benefit and Cost-Effectiveness Analysis

Choices based on marginal, rather than average, benefits and costs will tend to overproduce medical services.

Cost-benefit analysis of a childhood immunization program is straight-forward analysis because the costs of the drugs are well known and the benefits to individual children are easy to calculate.

Cost-effectiveness analysis is a limiting case of the general cost-benefit analysis.

Physicians generally focus on tradeoffs. Health care economists focus on maximizing benefits to society as a whole.

The estimate of the value of benefits expected from a treatment depends on the viewpoint of the party benefitting from that treatment.

Many useful medical technologies become wasteful when they are expanded to include low-risk individuals.

A problem with Cost-Benefit Analysis is that

A kidney cancer drug delays cancer progression for six months, with no known side effects. An estimated treatment cost is $54,000. What is the cost per Quality Adjusted Life Year (QALY) ?

One of the weak points in the Jones-Lee Approach to estimating Value of Life is that

The primary costs to be accounted for in health care projects include all of the following except:

It has been observed that some people are willing to accept a more dangerous job for a higher salary. If a study estimates that for each .01% increase in risk of death, an additional $360 in annual salary was observed, the estimated value of life is