Cost-Minimization and Cost-Effectiveness Analysis

Topic: Public Health
Words: 632 Pages: 2

Health systems are facing high demand, but they have a limited budget to provide the necessary support. However, a fundamental aim of a health system is to determine the best use of the available resources to enhance the health of individuals. The underlying principle of this objective is maximizing the value for money by selecting a mix of services in relation to the system is challenges. The common approach to solving resource allocation problems is assuming that the management chooses to maximize efficiency bearing in mind the problems the system is facing (Turner et al., 2021). Therefore, this has led to techniques such as cost-minimization and cost-effectiveness analysis that help decision-makers set their priorities right. The cost-minimization (CMA) and cost-effectiveness (CME) analysis are tools healthcare systems use to determine and evaluate the effectiveness of clinical interventions.

Cost-minimization analysis is an economic evaluation tool that is used in the health sector to measure and compare the cost of various clinical interventions. The tool is used to compare two approaches that are perceived to have the same effects or outcomes to determine which is the costliest. The approach focuses on finding the cost of each alternative and determining which is cheaper but with the best outcomes. Important assumptions in this analysis are that the two options have the same clinical benefits and that important alternatives have not been left out (Turner et al., 2021). However, the fundamental limitation of this approach is that is only applicable to treatment approaches that have the same benefits or outcomes. Additionally, the cost must be determined accurately for this tool to work.

In CMA, the assessment costs are dictated by the study’s objectives or perspectives. The most common ones include societal expectations and third-party payers’ preceptive (Rai & Goyal, 2018). To come up with the material used, a physical unit is defined e.g., the number of hospital stays, time spent by a nurse, and the number of doctor’s visits, among others. Once the above units are determined and defined, they are quantified and translated into costs by multiplying the unit costs by the number of units consumed (Turner et al., 2021). Nevertheless, the efficacy of this tool is limited since it is difficult to determine the effectiveness of one or two more interventions are equal.

Cost-effectiveness analysis concerns itself with enhancing the performance of healthcare systems by ensuring there is a productive use of resources allocated. This objective is only possible by taking into consideration of the full impact and opportunity costs of introducing a new program. The challenge is selecting among the alternatives all possible healthcare programs that maximize the overall health benefits (Rai & Goyal, 2018). The decision-makers have a constrained budget, and they have to choose from the different alternatives the intervention that will yield the desired output (Rai & Goyal, 2018). Therefore, the approach provides decision-makers in a clinical setting with a way of examining the costs of alternative approaches to achieving a specific health objective. The advantage of this tool is the ease of communication and specificity (Rai & Goyal, 2018). However, its shortcoming is that it cannot compare interventions across the health sector. For example, the cost can be compared, but it is not feasible to compare the outcomes.

Health facilities operate on a tight budget but are expected to give the patients the best healthcare. Therefore, cost-minimization and cost-effectiveness analysis are tools that decision-makers use to make the best use of the resources provided. Cost minimization tools help clinicians to determine the intervention that is cheaper but with the same outcome as the costly one. However, the tool is limited because it can only compare interventions with the same effects or outcomes. On the other hand, the cost-effectiveness analysis is important in allocating available resources to best use and maximize value.


Turner, H., Archer, R., Downey, L., Isaranuwatchai, W., Chalkidou, K., Jit, M., & Teerawattananon, Y. (2021). An introduction to the main types of economic evaluations used for informing priority setting and resource allocation in healthcare: key features, uses, and limitations. Frontiers in Public Health, 9.

Rai, M., & Goyal, R. (2022). Pharmacoeconomics in healthcare. In D. Vohora & G. Singh, Pharmaceutical medicine and translational clinical research (pp. 465-472). Elsevier Science.

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