Cost Effectiveness Calculator

How the cost effectiveness calculator works

Two options, two numbers each. Enter the total cost of the baseline and the health outcome it produces, then do the same for the comparison. The calculator returns the cost effectiveness ratio for each option on its own and the incremental ratio for the difference between them.

The average ratio is simple division: cost divided by effect. The incremental ratio divides the change in cost by the change in effect, which answers a different question. Average ratios describe how efficiently each option spends money. The incremental ratio describes what the extra money buys, and that is the number a budget holder needs.

Enter the willingness to pay threshold as the third input. The tool converts the comparison into net monetary benefit at that threshold, so you see the verdict in dollars as well as in a ratio. All arithmetic runs in the browser and nothing you type is sent anywhere.

Reading a cost effectiveness ratio correctly

CER = Cost / Effect. A program that spends $12,000 and produces 3.2 quality adjusted life years costs $3,750 per QALY. Lower is better for this ratio, and a ratio below the local threshold usually signals a good buy.

The measure only works when cost and effect are measured in the same units across every option being compared. Mix a program costed in hospital dollars with one costed in clinic dollars and the ratios are not comparable. The same caution applies to effects: QALYs, DALYs averted, cases prevented and life-years gained do not trade one for one.

An average ratio also hides scale. A tiny program can post an excellent ratio while reaching 200 people, and a larger program with a worse ratio can avert five times as many cases. When the budget is fixed, the ratio decides the order of adoption, and the size of the effect decides how much of the budget the program absorbs.

Incremental cost effectiveness ratio step by step

ICER = (Cost B - Cost A) / (Effect B - Effect A). Take a vaccination outreach program at $12,000 that produces 3.2 QALYs, and a pharmacy based version at $27,000 that produces 4.7 QALYs. The extra cost is $15,000 and the extra effect is 1.5 QALYs, so the ICER is $10,000 per QALY.

Note that B has the worse average ratio and still wins the comparison. B costs $5,744.68 per QALY on average, while A costs $3,750.00, yet the extra $15,000 buys 1.5 QALYs at $10,000 each, well under the $50,000 threshold. The average ratio penalizes B for its fixed costs, and the incremental ratio prices the decision that is in front of you.

What the ICER means against a willingness to pay threshold

A threshold turns a ratio into a decision. The ICER of $10,000 per QALY is below a $50,000 threshold, so the comparison is cost effective. Raise the threshold to $150,000 and far more programs qualify; drop it to $5,000 and this one fails. The threshold is a policy choice, not a fact about the program.

Net monetary benefit restates the same test in dollars: NMB = Effect x Threshold - Cost. Positive incremental NMB means the extra effect is worth more than the extra cost. The incremental form, Threshold x Change in Effect minus Change in Cost, gives the same verdict without dividing by a small number.

Every row clears because $10,000 sits below the lowest threshold shown. The break even threshold for this pair is exactly $10,000 per QALY, where incremental NMB equals zero. Below that point B destroys value even though it produces more health, which is the plainest way to explain why cheap interventions get adopted first.

The four quadrants of cost and effect

Every comparison lands in one of four cases, and each has a different answer. The signs of the cost difference and the effect difference decide the quadrant before any ratio is computed.

The dominated quadrant is the one to check first. A program that raises spending while lowering measured effect cannot be rescued by a good average ratio, because the ratio was computed against zero rather than against the alternative on the table. The disinvestment quadrant is harder: saving money by cutting a service always looks attractive on a budget sheet, and the ratio there expresses dollars saved per unit of health given up.

Why average ratios mislead across a portfolio

Ranking programs by average CER is common and often wrong. The failure shows up when one option is strictly worse than the baseline yet posts a flattering average ratio, or when fixed costs make a scaled program look inefficient against a small pilot.

Option F costs $5,172.41 per QALY, a better average than B, and it is still the worst choice in the table. Against A it adds $3,000 and loses 0.3 QALYs, so no threshold makes it worthwhile. Option E looks even cheaper on average at $4,210.53, and its incremental figure of $3,076.92 is money saved for each QALY given up, which is a disinvestment question rather than an adoption question.

Choosing the effect measure: QALY, DALY or cases prevented

The effect unit has to match the decision. QALYs suit comparisons across diverse treatments because they combine length of life with quality of life. DALYs averted suit global health work, where the burden of disease is the natural frame. Cases prevented or life-years gained suit a single disease program where the outcome is unambiguous.

Units are not interchangeable. A program at $10,000 per QALY and another at $10,000 per case prevented are not equally good buys, because a prevented case may be worth less than a full quality adjusted year. Keep one unit per analysis and say which one in the output.

Discounting also matters once costs and effects arrive in different years. A program that spends today and delivers health in 20 years looks worse after discounting at 3% a year, a convention the WHO guidance on cost effectiveness analysis sets out: WHO CHOICE programme. Apply the same discount rate to both arms, or the comparison is rigged.

Limits, sensitivity testing and what to report

A single ICER is a point estimate built from inputs that carry uncertainty. Cost per patient, uptake, adherence and the effect size all move. A defensible analysis reports a range and shows which input the verdict depends on.

Test the extremes. If B costs $32,000 instead of $27,000 the ICER becomes $13,333.33 per QALY and the program still clears a $50,000 threshold. If the effect falls to 4.4 QALYs at the original $27,000, the ICER rises to $16,666.67 and it still clears. A decision that survives both shocks is safer than one that flips on a 10% change in assumptions.

Report the perspective too. A health system view counts only medical costs, while a societal view adds productivity and travel. The same program can look cost effective to a hospital and dominant to society. The CDC framework for program evaluation covers how to document those choices: CDC program evaluation. Costing methods for economic evaluation are described in detail in NCBI Bookshelf: cost analysis in program evaluation.