Tuesday, January 26, 2010

Health Care & Cost Effectiveness

The Economist had a good article on comparative health costs. The point that I really liked is that most health care products and procedures compare their effectiveness against placebo's, not against prior products or procedures. It would be like comparing the effectiveness of a high-end window versus a hole in the wall. Of course the window will be more effective, but may not pass a cost-benefit test against a standard window for many homeowners.

While problems with comparative effectiveness studies abound, as mentioned in the article, such as the length of time to complete a study and stifling innovation, this will not be true for all cases. Just like a cost-benefit analysis, regulators can choose to study those cases where they can get the greatest bang for their buck - so to speak.

Finally, from an economic perspective, knowing that new health care products and procedures are being examined from a comparative effectiveness analysis will give health care producers more incentive to provide products and procedures that are more efficient.

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