Economic Evaluation

by

Jennifer Francis, Ann Netten

• LAST REVIEWED: 29 June 2011
• LAST MODIFIED: 29 June 2011
• DOI: 10.1093/obo/9780195389678-0063

Introduction

In a weak economic climate, politicians and local government decision makers cannot afford to ignore value-for-money considerations in the provision of publicly funded welfare. They must choose the most efficient intervention to maximize the overall societal benefit available from these scarce resources. Therefore, the effectiveness of an intervention alone is insufficient evidence on which to base decisions: the costs of an intervention might outweigh its benefits, or an alternative intervention might achieve the same outcome for a lower cost. Analysis of the benefits and costs of an intervention or service is known as economic evaluation. The development of approaches to economic evaluation for decision making is far more advanced in the field of health care than it is in social welfare. Important differences between social services and health care in the organization and provision of services mean that the methodology of health economics cannot simply be transferred. A different approach to economic evaluation in social services is required so that the evidence can be used reliably to inform decision making at policy and practice levels. This entry introduces the reader to different types of economic evaluation and explains some of the important features of social services that require a distinct approach to the application of economic evaluation methods. Finally, the entry outlines some of the ways that social work professionals can contribute to and draw on evidence from analysis of the costs and benefits of social services.

Types of Economic Evaluation

Raftery 1998, Robinson 1993, and Holtermann 1998 give clear and useful overviews of the various types of economic evaluation. Byford, et al. 2003 is aimed primarily at non-economists and guides the reader with great clarity through a range of methods of economic evaluation. Drummond 2005 categorizes the different methods into “full” and “partial” economic evaluations, while Dickson and Gough 2008 highlights a third relevant type, the single effectiveness study. Drummond defines full economic evaluations as the comparative analysis of alternative courses of action in terms of both their costs (resource use) and consequences (effectiveness). Full economic evaluation studies aim to clarify, quantify, and value the resource inputs and consequences of all relevant alternative courses of action. Shemilt, et al. 2008 identifies the several types of studies that fall into the category of full economic evaluation as cost-benefit analysis (CBA), cost-effectiveness analysis (CEA), and cost-utility analysis (CUA), the use of which is illustrated in Sahlen, et al. 2008. As Palmer, et al. 1999 explains, the types differ primarily in the way they itemize and value effects, and the differences between them reflect different aims and viewpoints on the different economic questions they seek to answer. Partial economic evaluations differ in that they either focus solely on costs and/or resource use but do not relate costs to consequences, or they focus on both costs and consequences but do not involve a comparison between alternative interventions. Types of studies considered to be partial economic evaluations include cost analysis, cost-comparison studies, cost-consequences analysis, and cost-outcome descriptions. Compared with full and partial economic evaluations, single effectiveness studies contain more limited information relating to the description, measurement, or valuation of resource use associated with interventions. While effectiveness studies do not constitute economic evaluations, Dickson and Gough 2008 argues that they may still nevertheless contribute useful evidence to an understanding of economic aspects of services or interventions in a sector that boasts few full or partial economic evaluations.

• Byford, Sarah, David McDaid, and Tom Sefton. 2003. Because it’s worth it: A practical guide to conducting economic evaluations in the social welfare field. York, UK: Joseph Rowntree Foundation.

  This clearly written book, aimed primarily at non-economists, is a step-by-step guide to the practical application of economic evaluation within the social welfare field. See chapter 3 for examples of the different types of economic evaluations.

• Dickson, Kelly, and David Gough. 2008. The feasibility of using a resource use coding tool to identify the costs of implementing good practice in social care. London: EPPI-Centre, Institute of Education, Univ. of London.

  Most of the literature in this area focuses on descriptions of and uses for full and partial economic evaluations. In this report, the authors explain an approach to extract useful resource information in order to understand economic aspects of interventions, even where full economic studies do not exist.

• Drummond, Michael, Mark Sculpher, George W. Torrace, B O’Brien, and Greg Stoddart. 2005. Methods for the economic evaluation of health care programmes. 3d ed. Oxford: Oxford Univ. Press.

  Provides detailed discussions of the different methods of economic evaluation.

• Holtermann, Sally. 1998. Weighing it up: Applying economic evaluations to social welfare programmes. York, UK: Joseph Rowntree Foundation.

  Provides an introduction to different methods of economic evaluations within the context of social welfare.

• Palmer, Stephen, Sarah Byford, and James Raftery. 1999. Types of economic evaluation. British Medical Journal 318:1349.

  The fourth in a series of occasional notes on economics. The authors start from the premise that economic evaluations tend to approach costs in a common format but differ in the way they approach benefits. They demonstrate these differences through a description of cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis.

• Raftery, James. 1998. Economic evaluation: An introduction. British Medical Journal 316:1013–1014.

  This short paper provides a clear introduction to the theory, objectives, and methods of economic evaluation.

• Robinson, Ray. 1993. Economic evaluation and health care. British Medical Journal 307:728–729, 793–795, 859–862, 924–926, 994–996.

  This series of brief papers provides useful introductions to the different methods of economic evaluation.

• Sahlen, Klas-Göran, Curt Lofgren, Britt Mari Hellner, and Lars Lindholm. 2008. Preventive homes visits to older people are cost effective. Scandinavian Journal of Public Health 16.3: 265–271.

  DOI: 10.1177/1403494807086983

  This is an example of a cost-utility analysis. The study takes a broad societal perspective (see Social Services Funding and Provision for further information about perspective) and concludes that preventive home visits are a cost-effective intervention.

• Shemilt, Ian, Miranda Mugford, Sarah Byford, Michael Drummond, Eric Eisenstein, Martin Knapp, Jacqueline Mallender, David McDaid, Luke Vale, and Damian Walker. 2008. Incorporating economics evidence. In Cochrane handbook for systematic reviews of interventions. Edited by Julian P. Higgins and Sally Green. The Cochrane Collaboration.

  This paper provides guidance on incorporating economics evidence into Cochrane systematic reviews. See especially box 15.1.b for descriptions of the main types of full economic evaluations; cost-benefit analysis (CBA), cost-effectiveness analysis (CEA), and cost-utility analysis (CUA).