Cost-effectiveness analysis (CEA) estimates the costs and health outcomes of alternative interventions to help inform the allocation of resources by identifying the intervention with the greatest improvement in health for the least cost. The World Health Organization (, Centers for Disease Control and Prevention (, and the U.S. Department of Veteran Affairs ( are among several organizations that provide an overview of, and resources related to, CEA.

A fundamental rule of CEA is that when comparing possible health care interventions, the preferred intervention is the one that provides a population with the most benefit per dollar. Sometimes budget constraints preclude the ability to offer the most cost-effective intervention to everyone.

Consider the hypothetical case of a Medicaid cancer screening program with a fixed budget of $200,000 to screen a specific population for colon cancer. There are two screening tests available. Test 1 is inexpensive...

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