Cost Effectiveness Analysis: Enhanced Access or Enhanced Communication for Physical Activity

A study finds that adults age 35 who live in communities that enhance access to facilities promoting physical activity (e.g. fitness centers, running and bike paths) are at lower risk of premature death (i.e. dying before average life expectancy). Specifically, the probability of premature death is 4 percent (0.04) lower for these individuals than their peers living in other communities. The same study found that 35 year-olds living in communities that promote physical activity through enhanced communication (e.g. individual counseling, education, and advertising) are 0.7 percent (0.007) less likely to die prematurely than their peers living in other communities.

In answering the questions below, use the following information about a county with a population of 1 million total residents:

Percent of population that is 35 years of age: 5 percent

Average remaining life expectancy of someone age 35: 45 years

QUESTIONS

1. below, for each type of program ("enhanced access" and "enhanced communication"), calculate the number of life-years saved among 35-year-old residents of the county.

Enhanced Access:

Enhanced Communication:

2. Suppose the present value of the cost (including construction and maintenance) of providing "enhanced access" to physical activity over the next 50 years would be $2.5 billion for the county.

In contrast, the present value of the cost of providing "enhanced communication" about physical activity over the next 50 years would be $550 million for the county.

below, calculate the incremental cost-effectiveness ratio (ICER) for each program, based on the following assumptions:

1. For "enhanced access," the alternative program is "enhanced communication."

2. For "enhanced communication," the alternative program is to do nothing.

Enhanced Access:

Enhanced Communication:

3. Which if either program would be considered cost-effective, based on the standard criterion? Briefly explain.