Abstract
In cost-benefit analysis both costs and benefits are measured in monetary terms. Unlike cost-effectiveness analysis in which the ratio of costs to effects must be compared with an external standard to judge the desirability of a health program, cost-benefit analysis permits a direct comparison of benefits and costs in the same units (1). The challenge, however, is to measure health benefits in monetary units.
According to economic theory, the consequences of a program should be measured as the willingness to pay of the individuals who bear the consequences. These consequences may include benefits such as increased probabilities of survival or improved quality of life, and they may include offsetting adverse effects such as side effects, complications, and inconvenience of treatment. Therefore, the major additional requirement in the design of cost-benefit as compared with cost-effectiveness studies in the health field is a method for measuring willingness to pay for the net consequences of health programs.