The Data
A county health department has funding for one new diabetes prevention program. They are evaluating two evidence-based options. Both programs reduce diabetes incidence. The question is which one to choose. (Data are simulated for illustration.)
A Community Health Workers
Trained community members conduct home visits, provide culturally appropriate education, and connect at-risk individuals to clinical services. Requires ongoing staffing costs but reaches people who avoid clinics.
B Digital Health Platform
Smartphone app with personalized nutrition coaching, activity tracking, and telehealth consultations. Lower per-person costs allow serving more people, but engagement varies and some populations lack digital access.
Context for This Decision
Both programs work. But choosing between them requires more than knowing they are effective.
Explore Program A to understand how economists calculate cost-effectiveness.
Program A: Community Health Workers
Program A spends more money reaching fewer people, but achieves deep engagement with each participant. Cost-effectiveness analysis translates these tradeoffs into a single comparable metric.
Cost and Health Outcome Breakdown
Program A costs $9,375 per QALY gained.
Is that expensive or affordable? Compare it to Program B to understand how relative cost-effectiveness drives decisions.
Program B: Digital Health Platform
Program B reaches more people at lower cost but with shallower engagement. Lower cost per person translates to more total health benefit from the same budget.
Cost and Health Outcome Breakdown
Program B costs $5,333 per QALY gained.
See how these programs compare directly, and explore how assumptions about reach and effectiveness change the decision.
Head-to-Head Comparison
Cost-effectiveness analysis enables direct comparison of programs with different costs and outcomes. The program with the lower cost per QALY delivers more health for each dollar spent.
Cost-Effectiveness Plane
Current Decision
Adjust the sliders to see how uncertainty in effectiveness estimates affects which program delivers more value.
The "best" choice depends on what you value and what you believe about uncertain estimates.
Explore the key insight to understand how economists think about these tradeoffs.
Key Insight
Cost-effectiveness analysis transforms complex program comparisons into structured decisions. But the analysis reveals tradeoffs; it does not eliminate them.
Incremental Cost-Effectiveness Ratio (ICER)
The ICER measures the additional cost to gain one additional unit of health benefit when comparing two alternatives:
- When one program costs less AND produces more health, it dominates the other
- When a program costs more but produces more health, the ICER tells you if the extra benefit is worth the extra cost
- Decision thresholds (like $50,000 or $100,000 per QALY) help determine if an ICER represents good value
Efficiency is not the only value
Program A might be preferred despite higher cost per QALY if it reaches populations that digital tools cannot serve. Equity considerations may override pure efficiency.
Uncertainty matters
Point estimates hide uncertainty. A program that looks better on average might have wide confidence intervals that overlap with the alternative.
Budget constraints are real
Even if Program A delivers good value, it may not be affordable. Budget impact analysis complements cost-effectiveness analysis.
Opportunity cost is the comparison
Economists compare programs not to "doing nothing" but to the next best use of those resources. Every dollar spent on one program cannot be spent elsewhere.
Key Takeaway
"It works" is not enough. Many programs improve health. The economist's question is which program improves health the most for each dollar spent. Cost-effectiveness analysis provides a framework for comparing options with different costs and outcomes. The program that generates more QALYs per dollar allows limited resources to produce more total health. This is what economists mean by "efficiency."