A new pneumonia vaccine has been developed which is a little more effective but more expensive to produce than the old vaccine. Medicare covers 100% of the cost of pneumonia vaccinations for everyone in Hahnemann County who is age 65 or older. Now that a new and better vaccine is available Medicare would like to perform a cost-utility analysis to determine the opportunity cost of covering 100% of the cost for the new vaccine.

The old vaccine used to cost $16 per dose to produce. The new vaccine costs $35 per dose to produce. But the cost of catching pneumonia is very high. If either vaccine fails, the cost of treating an infected elderly person is, on average, $1870.

The following are the conditional probabilities of success and failure for both vaccines:

Old Vaccine: Success Rate = 0.84

Old Vaccine: Failure Rate = 0.16

New Vaccine: Success Rate = 0.85

New Vaccine: Failure Rate = 0.15

Question 1: Expected Value Benefits

What is the expected value benefit of the old vaccine? (show your calculations)

What is the expected value benefit of the new vaccine? (show your calculations)

Question 2: Expected Value Costs

What is the expected value cost of the old vaccine? (show your calculations)

What is the expected value cost of the new vaccine? (show your calculations)

Question 3: Cost-Utility Ratio

Show the cost-utility ratio for the opportunity cost of continuing 100% coverage for the new vaccine. (show your calculations)