OTA found two divergent trends in published CEA/CBA studies. One trend, based largely within the academic community but slowly diffusing to research-oriented practitioners, is leading to rapid changes in the state-of-the-art of CEA/CBA. This trend is toward CEA/CBA studies characterized as interdisciplinary, of high quality, and advancing the state-of-the-art of the methods. These studies are also becoming increasingly oriented to concerns peculiar to the health field, such as health status measurement, equity considerations, and the value of health and of life itself. Since the studies are gaining wide readership-being published in the leading journals and are becoming more understandable to the lay public, they are enhancing acceptance of CEA/CBA.

The other trend, which is occurring outside the academic community, is characterized by a rapidly expanding CEA/CBA literature base. Many of the articles are written by practitioners who are increasingly concerned about the general concept of cost effectiveness in medical practice. For the most part, this body of literature is found in general health and medical journals. Although the analyses are not as methodologically advanced or complex as those in the former group-probably because the authors often do not have an economic or other quantitative background-their impact upon physician practice may be substantial. The increasing number of studies, in any case, certainly can be considered an index of practitioners' concerns about health costs.

LEGAL STATUS OF CEA/CBA

Currently, the law explicitly authorizes only one health-care-related agency, the National Center for Health Care Technology, to support CEA/CBA studies, although parts of the National Health Planning and Resource Development Act (Public Law 93-641) require that cost effectiveness be considered in some decision processes. Furthermore, no court rulings or pending cases directly relate to the use of these techniques in health care agencies. In areas

other than health (e.g., environmental regulation), however, there are immediate and significant judicial and legislative pressures to use CEA/CBA in decisionmaking. In the last two Congresses alone, more than 65 separate bills have included provisions for Federal agencies to use CEA/CBA or risk-benefit analysis in the decisionmaking process. See appendix E for a brief discussion of the legal status of CEA/CBA.

There are two basic types of health care resource allocation decisions that in theory could benefit from CEA/CBA. The first are decisions made within a fixed, constrained, or population-based budget, such as those made by health maintenance organizations (HMOs). The second are decisions made in the absence of a direct budget constraint, such as reimbursement decisions by medicare or certificate-of-need recommendations by local health planning agencies.

In the former-allocation decisions made within a budget-tradeoffs must be made, since not all projects can be funded. The projects that promise to deliver more benefits for the cost

should be more attractive than those projects expected to deliver fewer benefits. In these decisions, an economic constraint already forces costs to be considered. The function of CEA/ CBA in budget-constrained decisions, therefore, would be to illuminate the decision process and to require that implicit judgments be made more explicitly, thus forcing external examination of assumptions and of the values placed on the decision variables. Note that even though costs are normally taken into account in these budgetconstrained situations, the types of CEA/CBA or related analyses undertaken can still range from analyses on the net cost end of the continuum to analyses where effectiveness is ex

plicitly related to health outcomes or some equivalent measure.

In non-budget-constrained decisions, direct tradeoffs between competing projects often are unnecessary. Consequently, a function of CEA/ CBA in these decisions would be to force economic factors to be considered. In health planning decisions, for example, planners would be asked not only to consider whether a service is needed but also to compare the cost of the service with the expected benefits and perhaps to compare the costs and benefits of the service under study to the costs and benefits of other services that could be assigned higher or lower priorities.

CEA/CBA is viewed by different parties as ranging in usefulness from obfuscating the pertinent issues in a decision process at one extreme to illuminating and synthesizing the issues so well that the technique is used to make decisions at the other extreme. There is, however, a middle position that maintains that the technique could be helpful in structuring information and that this information should be only one of several components of a decision process. Both extreme positions mentioned above are associated with the use of CEA/CBA as a formal, structured analysis that is oriented toward a bottom-line answer, such as a cost-benefit ratio. Such a bottom-line, however, may avoid or even hide many important value judgments, thus providing an unambiguous answer which may rest on ambiguous data or assumptions.

Advocates of the middle position propose that CEA/CBA be used within the context of accepted principles of analysis in order to illuminate the costs and the benefits of a decision, but not necessarily to aggregate and weigh them. Warner mentions a similar perception of CEA/CBA as a consciousness-raising exercise: CEA/CBA would have "no direct influence on policy decisions, but its presence in the literature and in policy debates (would serve) to raise the general awareness and understanding of the economic side of health care, particularly among members of the medical profession" (615). When properly conducted, CEA/CBA can serve as a means of raising value and equity issues related to the subjects under study.

Most of the specific findings of this report relate to two major general findings of the OTA assessment. The first of the general findings is that performing an analysis of costs and benefits has the potential to be very helpful to decisionmakers, because the process of analysis structures the problem, allows an open consideration of all relevant effects of a decision, and forces the explicit treatment of key assumptions. The second general finding is that CEA/CBA exhibits too many methodological and other limitations to justify relying solely or too heavily on the results of formal CEA/CBA studies in making a decision. Thus, CEA/CBA could be useful for assisting in many decisions, but is probably not appropriate as the sole or prime determinant of a decision.