Cost-effectiveness analysis (CEA) and cost-benefit analysis (CBA) are methods that are used to evaluate the outcomes, or benefits, and the associated costs of interventions that aim to improve health. By developing an "accounting" framework for identifying and measuring outcomes and costs, CEA and CBA illuminate the trade-offs that are involved in choosing among alternative interventions and policies. As such CBA and CEA have emerged as central tools in health services research and evaluation.

CBA translates all costs and benefits into common, dollar values so that an overall assessment of the net gains of an intervention can be tallied. CEA fully analyzes the cost side, but leaves benefits (lives saved, cases prevented, etc.) in terms of their natural outcomes. The advantages and disadvantages of CBA versus CEA will be discussed.

Despite widespread application of CEA and CBA there remain significant differences in the methods that researchers and analysts use. This session will review conceptual and methodological issues in measuring costs in cost-effectiveness studies and program evaluation. Participants will work through an example of a cost-effectiveness study. Issues in valuing direct costs, indirect costs, measuring and discounting future costs and reflecting uncertainty will be reviewed. The recommendations of the U.S. Public Health Service Panel on Cost Effectiveness in Health and Medicine will be highlighted. The uses and limitations of CBA and CEA as public health decision-making tools will be discussed.