MG.1 Suppose the health department in a small county has been given a total budg
ID: 1139510 • Letter: M
Question
MG.1 Suppose the health department in a small county has been given a total budget of $10 Million to spend on new drugs in a new drug insurance plan. Its objective is to maximize health gains per dollar. The department's analysts have developed a list of drugs that could be covered by the insurance program, together with estimates of their costs and benefits (in QALYs gained): Benefit (QALYs) 500 500 250 200 150 100 100 100 100 Cost ($) 1,000,000 2,000,000 2,000,000 1,200,000 4,500,000 1,200,000 1,800,000 2,000,000 5,000,000 Drugs 50 800,000 a. Calculate the CER (cost effectiveness ratio (C1-Co) E1-Eo) ) for each drug, assuming the comparison case (Co, Eo) is doing nothing b. Given the limited total budget of $10 million, list the drugs that should be reimbursed the insurance plan (covering the most cost effective drugs first). c. What additional information would need to be provided in order to perform a cost-benefit analysis for each drug?Explanation / Answer
Drugs
Benefit
Cost
CER
A
500
1000000
2000
B
500
2000000
4000
D
200
1200000
6000
C
250
2000000
8000
F
100
1200000
12000
J
50
800000
16000
G
100
1800000
18000
H
100
2000000
20000
E
150
4500000
30000
I
100
5000000
50000
a. CER = Cost/ Benefit
b. A, B, D, C, F, J and G would be covered by the insurance plan as they have the lowest CER and Costs add up to 10000000.
c. C0 and E0 are needed to perform a comprehensive cost benefit analysis.
MG 2. The Value of a Statistical Life (VSL) is the amount of money that a person is willing to spend to save a life. It can be measured in terms of opportunity cost. The amount that the life can be worth in the future as against the cost of saving it.
Drugs
Benefit
Cost
CER
A
500
1000000
2000
B
500
2000000
4000
D
200
1200000
6000
C
250
2000000
8000
F
100
1200000
12000
J
50
800000
16000
G
100
1800000
18000
H
100
2000000
20000
E
150
4500000
30000
I
100
5000000
50000
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