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Limitations of cost-effectiveness analysis: Defective data and significant digits: Working paper series--97-01

Hildred, William and Pinto, James (1996) Limitations of cost-effectiveness analysis: Defective data and significant digits: Working paper series--97-01. Working Paper. NAU W.A. Franke College of Business.


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Some applications of Cost-Effectiveness Analysis in the process of allocating resources for health care use hospital "charges" as cost data. These are not appropriate for decision making within the framework of standard economic analysis. Also disputable is the accuracy of some calculations in these analyses, caused by failure to consider the limitations imposed by significant digits in the data. A Cost-Effectiveness Analysis of a proposed program for mass vaccinations for chicken pox provides a case study of the general problem, with additional specific evaluation of the problems encountered in using aggregated "charge" data from a statewide data base, compounding the initial error of using "charges" to depict economic costs. Institutionalist economic theory, based on the insights of John Dewey, is the basis for the evaluation. The article concludes that Cost-Effectiveness Analysis is misused in the reviewed article, and that the misuse is economically and politically detrimental.

Item Type: Monograph (Working Paper)
Publisher’s Statement: Copyright, where appropriate, is held by the author.
ID number or DOI: 97-01
Keywords: Working paper, decision making, cost effectiveness analysis, resource allocation, health care costs
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HJ Public Finance
NAU Depositing Author Academic Status: Faculty/Staff
Department/Unit: The W.A. Franke College of Business
Date Deposited: 26 Jan 2016 19:41
URI: http://openknowledge.nau.edu/id/eprint/1658

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