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Cost-Effectiveness Analysis Explained for Programme Managers
A plain-language introduction to cost-effectiveness analysis — incremental costs and effects, the ICER, QALYs and DALYs, thresholds, uncertainty — and the questions to ask of any cost-effectiveness result.
PDFUpdated 30 September 2026Economic evaluation & HTA
What's inside
- What cost-effectiveness analysis compares, and why the comparator matters
- How to calculate and read an incremental cost-effectiveness ratio (ICER)
- QALYs and DALYs in plain language
- The four quadrants of the cost-effectiveness plane
- Thresholds, net monetary benefit and uncertainty
- Ten questions to ask of any cost-effectiveness result
Key points
- 01Cost-effectiveness is always relative to a comparator; a result without a stated comparator cannot be interpreted.
- 02The ICER is the extra cost per extra unit of health gained.
- 03Whether an ICER is "good value" depends on a threshold, and thresholds are debated.
- 04Budget impact is a separate question; a cost-effective intervention may still be unaffordable.
Frequently asked questions
What is a good ICER?
There is no universal value. An ICER is judged against a threshold that reflects what a health system can afford to pay for a unit of health; how thresholds should be set is actively debated, particularly for low- and middle-income countries.
What is the difference between cost-effectiveness and cost-utility analysis?
Cost-utility analysis is a form of cost-effectiveness analysis in which health effects are measured in a generic unit that combines length and quality of life, such as QALYs gained or DALYs averted.
Is cost-effectiveness analysis the same as budget impact analysis?
No. Cost-effectiveness asks whether an intervention is good value compared with an alternative; budget impact asks what adopting it will cost a specific budget holder over the next few years.
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This guide explains the method. If you would rather have the analysis done for you — with local data, independent quality control and a report you can defend — we can help.
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