Cost-Effectiveness Analysis and Cost-Benefit Analysis in Health Care: A Critical Narrative Review of Methodological Controversies and Contemporary Extensions

Abstract

Cost-effectiveness analysis (CEA), most often implemented as cost-utility analysis (CUA) using the quality-adjusted life-year (QALY), and cost-benefit analysis (CBA) are frequently presented as alternative, competing frameworks for health resource allocation, distinguished primarily by whether health outcomes are expressed in natural/utility units or monetised. This review argues that this framing, while pedagogically convenient, obscures a more important and less settled set of questions that determine whether either framework produces decision-relevant results: how the cost-effectiveness threshold (or, equivalently, the shadow price of health) should be derived; whose costs, benefits, and preferences should count; how the distribution - not merely the sum - of costs and effects across the population should be valued; and how parameter uncertainty should influence both the decision and the research agenda that follows it. After briefly establishing the conceptual core shared by CEA and CBA through the net-benefit framework, this review provides a critical synthesis of four areas of active methodological development: the opportunity-cost-based threshold debate; distributional cost-effectiveness analysis (DCEA); extended cost-effectiveness analysis (ECEA) and its cross-sectoral CBA-like extensions; and value-of-information (VOI) analysis as a link between economic evaluation and research prioritisation. Multi-criteria decision analysis (MCDA) is discussed as a complementary, non-aggregative alternative where a single threshold-based metric is contested or unavailable. Each of these developments is illustrated with a detailed published case study - the UK Bowel Cancer Screening Programme (DCEA), HPV vaccination financing in China and rotavirus vaccination in Ethiopia and India (ECEA), and the empirical re-estimation of the NICE cost-effectiveness threshold (the threshold debate) - chosen because each demonstrates a setting in which the conclusions of an evaluation change materially depending on which of these methodological extensions is applied. The review closes with practical guidance for researchers on selecting and combining these frameworks, and identifies open questions that remain unresolved in the literature.