Something old, something new, something borrowed, something blue: a framework for the marriage of health econometrics and cost-effectiveness analysis

Health Econ. 2002 Jul;11(5):415-30. doi: 10.1002/hec.678.


Economic evaluation is often seen as a branch of health economics divorced from mainstream econometric techniques. Instead, it is perceived as relying on statistical methods for clinical trials. Furthermore, the statistic of interest in cost-effectiveness analysis, the incremental cost-effectiveness ratio is not amenable to regression-based methods, hence the traditional reliance on comparing aggregate measures across the arms of a clinical trial. In this paper, we explore the potential for health economists undertaking cost-effectiveness analysis to exploit the plethora of established econometric techniques through the use of the net-benefit framework - a recently suggested reformulation of the cost-effectiveness problem that avoids the reliance on cost-effectiveness ratios and their associated statistical problems. This allows the formulation of the cost-effectiveness problem within a standard regression type framework. We provide an example with empirical data to illustrate how a regression type framework can enhance the net-benefit method. We go on to suggest that practical advantages of the net-benefit regression approach include being able to use established econometric techniques, adjust for imperfect randomisation, and identify important subgroups in order to estimate the marginal cost-effectiveness of an intervention.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Baltimore
  • Community Mental Health Services
  • Cost-Benefit Analysis / methods
  • Cost-Benefit Analysis / statistics & numerical data*
  • Health Services Research / economics
  • Health Services Research / methods*
  • Humans
  • Ill-Housed Persons / psychology
  • Mental Disorders / economics
  • Mental Disorders / therapy
  • Models, Econometric*
  • Outcome Assessment, Health Care / economics*
  • Outcome Assessment, Health Care / methods
  • Random Allocation
  • Randomized Controlled Trials as Topic
  • Regression Analysis
  • Therapeutic Community
  • Treatment Outcome