• The distribution of the effects across different population subgroups;

  • Impacts that cannot be quantified easily; and

  • Features of the risks that are not easily captured in the benefits measures.

Economic analysis is only one of many kinds of information that contribute to decisions related to regulation of health and safety risks. Regulatory decisions should and do reflect a number of considerations in addition to aggregate estimates of costs and benefits.1 The goal of this chapter is to discuss the assumptions and methodological limitations inherent in such analysis that, from the Committee’s perspective, are most important to consider in making decisions.

More specifically, the aggregate nature of net benefits or a cost-effectiveness ratio means that these measures by themselves cannot capture the distribution of benefits or of costs in a population. Aggregate estimates of QALY gains or cost-effectiveness ratios do not indicate the distribution of impacts over time or the magnitude of individual gains. Summed QALYs do not distinguish between health gains made within the course of a single life or across generations. Nor do they indicate whether the QALY gains represent small health improvements widely dispersed throughout a population or larger gains allocated among relatively few people.

Summary benefit–cost and cost-effectiveness measures also omit benefits that are difficult to quantify. Such benefits include health and nonhealth effects for which numerical estimates are not available, for example, because the scientific research base is inadequate to support quantified estimates of impacts or because relevant monetary values or effectiveness measures have not been developed. Policy makers and the general public may also care about characteristics that are not captured in QALYs nor by many of the other valuation measures used in CEA or BCA, such as the degree to which the risk is observable or controllable, and whether the risk is especially dreaded.

In this chapter, we first examine the ethical and normative2 assumptions implicit in the calculation of the cost-effectiveness ratio, including the


This position is reflected in the recommendations of previous expert panels and current Executive Office of the President guidance (U.S. Panel on Cost-Effectiveness in Health and Medicine, Gold et al., 1996b; Institute of Medicine Committee on Summary Measures of Population Health, IOM, 1998; Executive Order 12866, EOP, 1993; and Circular A-4, OMB, 2003a).


In this chapter, “normative” refers to a variety of value-based judgments and beliefs, including some that are not ethical or moral in nature. For example, the fact that some people consider death from cancer worse than death from other causes is by itself not an ethical concern, though it involves a value-based judgment that guides their behavior.

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