Economics Homework Help

The following information has been gathered on the costs and effectiveness of the two treatments, A and B. In this problem, costs and consequences are not discounted.

	Treatment A	Treatment B
Mortality rate	2%	5%
Life expectancy for survivors	20 years	10 years
Initial treatment cost	$10,000	$3,000
Follow up costs, year 1	$5,000	$1,000
Annual follow up costs, all subsequent years	$1,000	$500

Complete the following calculations and analysis:

• What is the total cost for the survivors receiving treatment A? For decedents (assuming sudden death)?
• What is the total cost for survivors receiving treatment B? For decedents?
• What is the expected cost for those patients receiving treatment A?
• What is the expected cost for those patients receiving treatment B?
• Draw a simple decision tree showing the costs and consequences of each treatment option
• Calculate the incremental cost and incremental benefit of the treatment alternatives.
• What is the ICER?
• Which treatment would you recommend be covered by your health plan and why?