6.1 Incremental cost-effectiveness ratios

A key metric in cost-effectiveness analyses is the incremental cost-effectiveness ratio (ICER). ICERs represent the amount of additional spending required to achieve one additional unit of health output gained. An ICER can be calculated using the following equation:

Health outcomes can be expressed in any form defined by the economic analysis, such as DALYs, QALYs, deaths or cases. Incremental costs are the costs of one intervention minus the costs of the comparator strategy.

Similarly, incremental health outcomes are the health outcomes of one intervention minus the health outcomes of the comparator strategy. ICERs are then reported as the additional cost per health unit that is gained; for example, cost per DALY averted, or cost per case averted. The ICER calculation can be rearranged to calculate the net monetary benefit (NMB), another key metric that is not explored further in this course.