A public hospital would like to reduce breast cancer mortality by 20% every year. In order to
Question:
A public hospital would like to reduce breast cancer mortality by 20% every year. In order to do that it has two different options:
- To buy technology X that allows detecting breast cancer at an earlier stage reducing breast cancer mortality by 20% every year.
Technology X will be bought at the beginning of 2020 (year 0) and it will be operative right away, meaning that mortality will be reduced by 20% already in 2020. The technology will be operative 10 years (until 2029, year 2029 included). However, every three years it needs to be checked and the hospital needs to pay the inspection costs. The following table summarizes all the costs:
| Year | Cost |
| 2020 | 100000 |
| 2023 | 2000 |
| 2026 | 3000 |
| 2029 | 4000 |
- To buy technology Y that allows treating breast cancer in a less aggressive manner reducing breast cancer mortality by 20% every year.
Technology Y will be bought at the beginning of 2020 (year 0) and it will be operative right away, meaning that mortality will be reduced by 20% already in 2020. The technology costs 75000 dollars paid at the beginning (year 0). The technology will be operative 10 years (until 2029, 2029 included). These technology should be updated after 5 years. The update cost is 20000 dollars. The following table summarizes all the costs:
| Year | Cost |
| 2020 | 75000 |
| 2025 | 20000 |
With this information, which option is the most cost-effective technology to reduce breast cancer mortality by 20% per year (in 2020, meaning 2020 is year 0)? The discount rate is the one used by the Canadian Federal government as the social time preference rate. Show your calculations and explain your answer.
Expert Answer:
